Fund Managers

PDI annual awards 2018: Our Americas winners

Crestline, Golub and Oaktree were all double winners in the Americas section of our annual awards.

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Lender of the year

1. Golub Capital
2. GSO Capital Partners
3. TPG Sixth Street Partners

David Golub

Golub took the top prize for the Americas, after raising more than $2.5 billion for its flagship mid-market lending fund: Golub Capital Partners 11. Looking back at the year, Golub Capital president David Golub said: “The biggest challenge was larger size transactions where our competition was a syndication market that often lacked appropriate standards around documentation and terms,” noting it changed in the fourth quarter. Golub, which typically backs private equity-backed companies with between $5 million and $100 million, has since raised almost $200 million for its follow up Fund 12.

The firm has also been busy deploying its capital. Among the deals closed in 2018 was a $450 million loan to back GI Partner’s acquisition of California Cryobank and Core Blood Registry. Other recent transactions include a unitranche loan backing the acquisition of Sola Salon Studios by AHR Growth Partners, MPK Equity Partners and PNC Riverarch Capital.

Senior lender of the year

1. Twin Brook Capital Partners
2. Ares Management
3. Golub Capital

Young guns: Trevor Clark, managing partner, Twin Brook Capital

Twin Brook Capital Partners, the mid-market direct lending subsidiary of Angelo Gordon, turned four this year. It has a lot to show for a young firm. In 2018, it grew its headcount from 42 employees to 56 and committed $3.9 billion to lower mid-market companies.

“2018 was an interesting year in that the volume of transactions we reviewed with our private equity partners was up considerably over 2017, and yet the number of transactions that the private equity groups or we passed on was also up,” said Trevor Clark, a managing partner.

The firm maintains its focus on companies with EBITDA under $25 million, with the average EBITDA for the transactions closed in 2018 at $17.6 million, he added. The firm is starting 2019 with a bang, with the upcoming close of its largest fund to date, AG Direct Lending Fund III which has now raised over $3 billion.

Junior lender of the year

1. Crescent Capital Group
2. GSO Capital Partners
3. Goldman Sachs

This is the third year Crescent Capital has won junior lender of the year. So far, the firm’s latest vehicle, the $4.6 billion Crescent Mezzanine Partners VII, has produced a 10.8 percent net IRR and a 1.09x total multiple value paid in, according to Florida State Board of Administration documents.

“It continued to be a difficult market last year with spreads tightening throughout most of the year,” said Chris Wright, managing director at Crescent, adding that rising interest rates have also contributed to tighter cashflows in a market that hasn’t seen leverage come down.

“Volatility gives me optimism as we look to put money to work,” he said. “During periods of volatility, we have seen banks become more reluctant to lend, particularly in the junior debt pieces. Sponsors see a lot more value in certainty and price execution, which plays to our strengths.”

Lower mid-market lender of the year

1. Monroe Capital
2. Twin Brook Capital Partners
3. Madison Capital

Monroe Capital has won its fourth lower mid-market lender of the year award in a row, the only firm to do so since the award’s inception. The firm recently closed Monroe Capital Private Credit Fund III, on $1.33 billion, well above its $800 million target. When investing, the company focuses on companies with up to $30 million in EBITDA.

Monroe president and chief executive officer Ted Koenig attributes this success to the firm having the same management and executive team, with a strong track record, for more than 18 years. “When you are able to have that much longevity and consistency in a particular space, I think it breeds success,” Koenig said. “Hopefully they will retire the award with us.”

BDC of the year

1. Ares Capital Corporation
2. Golub Capital 
3. TPG Specialty Lending

Alcami: drug manufacturer generated Ares’ largest gains

In 2018, Ares largely finished disposing of assets it acquired from American Capital, the largest BDC merger to date. That included selling drug manufacturer Alcami, generating the firm’s largest net realised gain to date. Ares sold the company to Madison Dearborn Partners and ended up making $324 million off the transaction, more than double the original investment.

However, Alacami didn’t leave Ares’ portfolio; as part of the sale, Ares led a $390 million first-lien and second-lien financing package.

“We can speak to the same discipline in 2018 that we have had over the years. We can rely on our existing portfolio companies as a source for new deal flow,” Kipp deVeer, chief executive, told PDI, adding about 50 percent of Ares Capital’s transactions came from within its portfolio last year.

Distressed debt investor of the Year

1. Oaktree Capital Management
2. TPG Sixth Street Partners
3. CarVal Investors

Oaktree is an industry leader in the distressed debt space and has won this category every year since the PDI awards’ inception in 2013.

The firm is in the midst of raising its second special situations fund, Oaktree Special Situations Fund II, which was launched in January 2018 with a target of $1.75 billion. At the end of 2018, the fund has raised more than $1.33 billion.

“Incentive income for the year totalled $496 million, driven by strong realisations in our distressed debt, special situations and real estate strategies. The largest contributor was distressed debt at $262 million,” Dan Levin, the firm’s chief financial officer, said on Oaktree’s fourth-quarter earnings call. The firm has more than $21 billion in assets under management for the strategy.

CLO manager of the Year

1. Golub Capital
2. GSO Capital Partners 
3. KKR Real Estate Finance Trust

In 2018, Golub Capital played a key role in furthering the use of CLOs to finance BDCs. The firm received a no-action letter from the Securities and Exchange Commission, allowing Golub Capital BDC to issue the first mid-market CLO for a BDC post-risk retention rules, a $602.4 million deal priced in November.

“The no-action letter was huge because it enabled us to go back to our preferred financing strategy – a mix of bank facilities and securitisations, with an emphasis on securitisations,” said David Golub, Golub Capital BDC’s chief executive and Golub Capital’s president.

“My expectation is that 2019 will bring more tiering in mid-market CLOs based on manager quality,” he added. “Better quality managers will get meaningfully better pricing. Across both debt and equity markets, we are seeing investors vote with their wallets for proven managers.”

Infrastructure debt manager of the Year

1. Brookfield Asset Management
2. Macquarie Infrastructure Debt Investment Solutions
(MIDIS)
3. AMP Capital

Hadley Peer-Marshall

Brookfield Asset Management closed its first infrastructure debt fund at $885 million, above its $700 million target. The vehicle will target primarily mezzanine debt investments for North America. The firm is also planning to launch a European counterpart.

“Investor appetite for infrastructure debt strategies continued to grow in 2018, given the attractive risk-adjusted returns and exposure to infrastructure which, among other real asset investments, is attracting a growing proportion of portfolio allocations,” Brookfield Infrastructure Group managing director Hadley Peer-Marshall said.

“Heading into 2019, we anticipate investors will continue to deploy capital into infrastructure debt in order to diversify while providing yield, particularly as investors are becoming more familiar with the asset class and there are a greater number of strategies with track records available.”

Real estate debt manager of the Year

1. Oaktree Capital Management
2. PIMCO
3. TH Real Estate (Nuveen)

Jay Wintrob

The Los Angeles-based debt shop had great success in its real estate strategy during 2018. The firm closed on its latest real estate debt fund on more than $2.18 billion, which beats its original target of $1.75 billion. As of the end of 2018, 33 percent of the fund had been deployed. “We’ve seen meaningful increased deployment across all three strategies for real estate,” Jay Wintrob, chief executive officer at Oaktree (pictured), said on the firm’s fourth-quarter earnings call.

The firm’s real estate had weighted average returns of 15 percent during 2018, according to the firm’s fourth-quarter earnings results. The firm will also look to raise its eighth real estate opportunity fund during 2019. The strategy has more than $3.2 billion in assets under management.

Deal of the Year

1. Clearlake Capital Group (Dyal Capital, Goldman Sachs, Landmark Partners)
2. Radiology Partners (Golub Capital)
3. Air Medical (Ares Capital Corporation)

Goldman Sachs’ Petershill unit and Neuberger Berman’s Dyal Capital Group went in on a deal together, for the first time, and took a minority stake in Clearlake Capital Group. Landmark, an existing Clearlake partner, was involved in the equity raise as well. “Selling a passive, non-voting minority stake allows us to deepen our resources, provide permanent capital to significantly increase the firm’s investments in its own funds, and explore strategic initiatives,” Clearlake said.

The transaction helped the firm close its $3.6 billion Clearlake Capital Fund V, which Clearlake invested 2 percent of. The firm looks to use that fund to invest in what it calls “a unique sector of special situations credit, equity and credit strategies” with its “operational improvement approach”.

Fundraising of the Year

1. Crestline Investors
2. GSO Capital Partners
3. Goldman Sachs

Crestline had an active year regarding fundraising, with multiple funds closing at their hard-cap.

The firm closed its Crestline Specialty Lending Fund II in October, on its hard-cap of $800 million. The firm closed its inaugural Portfolio Finance Fund in November, which also closed on its hard-cap of $600 million, and was raised entirely during 2018.

The firm also launched a direct lending fund in Europe in September that has already beat its $300 million target. “Crestline continues to focus on investment opportunities where we have identified a market gap and where we believe we have the right expertise and capital to fill that gap,” the firm said.

Investor of the Year

1. Dyal Capital Partners
2. Arizona State Retirement System
3. Alaska Permanent Fund Corporation

While Dyal Capital Partners may not be the classic profile of a limited partner, the firm has emerged as one of the top players in the burgeoning strategy of alternative asset managers taking minority stakes in other such firms.

What’s notable about Dyal, particularly, is that its investment proceeds often provide seed capital for first-time credit funds, or the capital the target firm receives is used to expand an existing debt arm. The firm has invested in Vector Capital, which used the money to speed up the growth of its credit business.

“We view the private credit market as one of the most interesting areas of opportunity for leading firms and set out to find partners that were truly differentiated and proven market leaders,” Michael Rees, head of Dyal, told PDI.

Law firm of the Year

1. Kirkland and Ellis
2. Dechert
3. Proskauer

Innovative approach: Chicago-headquartered Kirkland and Ellis

Kirkland and Ellis helped its clients find fundraising success this past year due to its ability to help firms customise and innovate the fundraising process. The firm took on 170 new clients for its Investment Funds Group this past year, 15 percent of which, or 24 new clients, were credit-focused.

Sean Hill, a partner on the firm’s investment funds group, said credit funds have so many nuances, and that Kirkland is able to navigate clients’ questions and find solutions more quickly than other players in the market.

“The credit portion of what we do has expanded significantly over the past couple of years,” Hill said. “As our clients have grown and matured, we have assisted them with growing their platform.”

Placement agent of the Year

1. Park Hill Group
2. Morgan Stanley
3. Eaton Partners

Despite a slower year for private debt fundraising, Park Hill Group was active. The firm served as the placement agent on Owl Rock Capital’s behemoth fundraise that ended with more than $5.4 billion in capital commitments.

“Given our experience in the space, we have been able to partner with extremely high-quality managers that remain ahead of the curve in their markets and offer differentiated exposure to LPs,” the firm said. “Given private debt allocations can come from various pools of LP capital, our global credit network and the depth of our team has been a crucial advantage.”

Since Park Hill Group’s founding in 2004, the firm has helped raise more than $36 billion in capital commitments for private credit-focused funds.

Specialty finance lender of the Year

1. Hercules Capital
2. Atalaya Capital Management
3. Perceptive Advisors

Strong performance: Hercules founder and chairman Manuel Henriquez

Hercules Capital, one of the industry leaders in venture debt, had a record-breaking year as it originated more than $1.2 billion worth of debt and equity commitments during 2018.

“I think one of the most important things in 2018 was the wide diversification to the access of liquidity we achieved in the market,” founder, chairman and chief executive, Manuel Henriquez said. “We accessed nearly $1 billion of liquidity.”

He added that the firm’s continued success in the venture debt space was due to its focus on lending to strong companies, and not letting each individual quarter’s earnings impact its lending strategy. “I think the greatest attribute to our success is the focus on maintaining discipline and really not deviating from that discipline,” Henriquez said.

Fund financier of the Year

1. Crestline Investors
2. JPMorgan
3. SunTrust Bank

Crestline Investors set itself apart this year by closing an over-subscribed fund finance-focused vehicle that hit its $600 million hard-cap, in less than a year. This fund works to provide creative short-term solutions for private equity funds, and has an emphasis on portfolio financing.

Dave Philipp, the managing director and senior portfolio manager of the Fund Liquidity Solutions Group at Crestline, said the firm can offer its clients unique and customised solutions because of its experience across private equity, credit and secondaries. “We don’t try to tell them what they need our capital for. We work with them to solve their liquidity shortfalls,” Phillipp said. “But as the world of fund financing evolves, I expect Crestline to be at the forefront.”

Sell-side analyst of the Year

1. Wells Fargo
2. JMP Securities
3. KBW

Wells Fargo BDC analyst Finian O’Shea had big shoes to fill after his former boss and BDC evangelist Jonathan Bock took a role as Barings BDC’s chief financial officer in mid-2018.

But O’Shea more than met expectations – his shoes probably grew a size. He defended his firm’s title, which won the same category in 2017’s awards. His research is often the talk of the Street; a credit manager that met with PDI pointed to a recent piece by O’Shea when discussing BDC consolidation. “I tend to scrutinise loan vintage, especially for managers with less robust underwriting track records,” he said. “Something that’s been on the books for four years is a good starting point to look for future potential losses. High-quality loans fly off between one and two years.”