NN IP, the investment arm of Dutch insurance firm NN Group, has plans to market a closed-ended fund targeting investments in private debt in the second quarter of 2017, PDI can reveal.
With plans at an early stage, NN IP head of global credit Han Rijken declined to offer a target amount for the fundraise in a phone interview with PDI. The developments follow the recent appointment of Gabrielle Kindert to lead the firm’s alternative credit strategies, which comprises of commercial and real estate debt investments as well as infrastructure debt.
Until now, the firm has worked on a bespoke basis, preparing separate mandates based on how private debt investments can add value to portfolios.
“Five years ago, we started to see an opportunity for institutional investors to fill the gap in the lending market vacated by the traditional banks,” said Rijken.
A closed-ended fund structure is a natural fit for the illiquid nature of the asset class, Kindert explained. “For insurance companies and pension funds, the issue of illiquidity is not a problem as long as the returns match their liabilities. This product, however, can only be offered in a closed-ended structure as the risk of redemptions means there is a knock-on effect for other investors.”
Under the private credit strategy, NN IP invests in both private placements and direct lending, as well as other strategies including residential and commercial mortgage loans and infrastructure debt. The duration of private placements range between five and 15 years and private debt three to seven years, seeking spreads of 150 – 275 bps and 180 – 450 bps in the respective strategies. The firm invests in both senior and junior debt, both secured and unsecured loans.
Explaining why the time is right to manage such a strategy, Rijken said there is a greater understanding of the opportunities offered by private debt. “All institutional investors think private debt is an interesting asset class, but for a lot of them it is their first time stepping into the market.”