Oklahoma endowment picks Alcentra for $25m mandate

The investment marks the Oklahoma Tobacco Settlement Endowment Trust’s first allocation to a European direct lending manager.  

The Oklahoma Tobacco Settlement Endowment Trust Fund (TSET) picked Alcentra to manage a $25 million (€22.7 million) European direct lending mandate after TSET launched its search in April with the help of investment consultant NEPC.

The TSET board of investors selected the Alcentra European Direct Lending Fund II for the brief at 11 July meeting. Hayfin Capital Management was the other finalist in the $956 million endowment’s search.

Alcentra’s second European direct lending fund already passed its €1.5 billion fundraising target and collected €2 billion so far, as PDI previously reported. The vehicle is expected to hold a final close by year-end.

Alcentra’s last European direct lending fund is about 91 percent invested and delivered 11.5 percent gross IRR through 31 March, according to investment documents obtained by PDI. The new fund is targeting net IIR of 8-10 percent.

The management fee is 1 percent on invested capital, with a 25 basis point discount for commitments exceeding €75 million, according to the manager’s pitch book obtained by PDI. The performance fee is a 10 percent carried interest subject to a preferred return of 5 percent with a catch-up mechanism. The documents note that this is NEPC’s preferred pricing.

Hayfin was in the finals with its own second direct lending fund, which launched last year and is gathering €2.25 billion, according to PDI data. The firm’s first direct lending fund invested €2.5 billion in 78 investments and expects to earn an overall gross IRR of 7.9 percent. The management fees are tiered, depending on commitment size, from 75 to 95 basis points. The fund has a 10 percent carried interest subject to a 5 percent preferred return with a 25 percent catchup.