Neuberger Berman breaks through debut fund target

The private equity investor has raised over $200 million more than its initial $400 million target for its first private debt fund.

Neuberger Berman has collected $620 million for its debut private debt fund, NB Private Debt Fund LP. The new vehicle is being swiftly followed by a second, the firm launched a successor private debt fund last month, PDI understands.

Neuberger Berman's debt strategy is focused on providing loans to private equity-backed North American companies. The new fund has the flexibility to invest across the capital structure, including unitranche, second lien and mezzanine debt investments in both primary and secondary markets.

The vehicle is unlevered which was a conscious decision to avoid risk given the relatively late stage in the credit cycle, said a source close to the vehicle. The new fund is targeting low double-digit returns.

The firm's debut credit fund broke through its $400 million target to raise more than $620 million from investors. The vehicle raised commitments from more than 25 institutions, including public and private pension funds, insurers and foundations, the firm said.

Around one-third of the investors are US-based, with another third from Canada and the remainder from Europe and Japan, the source added.

Neuberger offered investors below average fees to investors joining the debut vehicle, as previously reported . Investors will pay a 1 percent management fee on invested capital with no fees on committed capital with tiered performance fees based on the investors' commitment size

The fund made its first investment in June 2014 and is around 52 percent invested via deals with 22 borrowers. The firm focuses on lending to established, profitable companies in defensible sectors across North America with EBITDA of between $20 million and $250 million. Typical loan sizes range from $25 million to $75 million.

Neuberger deliberately focuses on sponsor-backed deals where the wider firm's private equity network helps it forge links with sponsors seeking debt.

The firm established its private debt strategy in April 2013 when it hired Susan Kasser (pictured) from The Carlyle Group to head up the business. Kasser was a founding member of Carlyle Mezzanine Partners. 

Including its first pooled fund, Neuberger Berman's private debt team managed $1.5 billion of committed capital at the end of August. This total includes commitments from accounts managed by the private debt team including capital allocated from NB Private Equity Partners, a UK-listed investment vehicle. 

Neuberger Berman is an independent, employee-owned investment manager. Strategies managed by the firm include equities, fixed income, private equity and hedge fund portfolios. It managed $251 billion in client assets, as of 30 June 2015.