Neuberger Berman collects $1.7bn for latest debt fund

The firm’s co-head of private debt still sees investors making first-time allocations to the asset class, despite the glut of capital raised in recent years.

Neuberger Berman Group held a final close above its $1.5 billion target for its latest private credit fund, the New York-based firm said in a statement.

The asset management behemoth, which oversees traditional and alternative investments, has closed NB Private Debt Fund III at $1.7 billion. That total is more than twice the size of its $750 million predecessor fund, which held a final close in October 2016.

Co-head of private debt Susan Kasser cited two factors that drove the large increase in demand for the most recent fund: strong performance in the predecessor fund and Neuberger Berman’s large fund-of-funds business, through which the private debt group sources deals. Fund III will invest in first lien, unitranche and second lien debt of private equity-backed US mid-market companies.

About two-thirds of the firm’s private debt LPs come from the US and Canada, with remainder spread among Europe, South America, Japan and South Korea, she said, adding the investors are predominantly pension funds.

Despite the influx of capital into private debt in recent years, Kasser doesn’t think limited partners are slowing their commitments in response to the avalanche of cash. First-time investors are still entering the space, she said, and noted that those holding off on investing were among the earlier allocators to the asset class.

“For investors who were early to the asset class – those committed on the heels of the financial crisis, even 2010 – many are taking a pause; they are slowing down because they’ve executed their plan,” she added. “Still, a lot of people are doing the work on the asset class and investing for the first time.”

Neuberger Berman oversees $323 billion across fixed-income and equity funds as well as private markets strategies.