UK-based private debt fund manager Prefequity is set to finalise 10 to12 commitments of between £5 million and £20 million by the end of March, allowing the firm to hold a first close for its £125 million (€146 million; $197 million) fund.
Theo Dickens, a London-based partner at Prefequity, told Private Debt Investor: “For the first close we are focusing less on institutional investors, and more on family offices.”
One institutional investor that has committed to the fund, however, is the European Investment Fund, which invested an undisclosed amount.
Prefequity also hopes to receive investment from the British Government under the Business Finance Partnership. “Slowly but increasingly, investors are seeing that there is great potential in direct lending to small to medium size companies,” added Dickens.“We don’t finance buyouts because we don’t like the risk / reward [profile] in that market. We are about providing fresh capital for companies that want to grow.”
Though the fund is relatively small, Dickens said the firm has already built a long pipeline of potential transactions.
“The market that we are trying to cater for is a niche one – between what banks will offer and where private equity investment is required,” he explained.
Dickens said he believed the UK and the rest of Europe would come to look a lot more like the US, “with 20 percent of corporate credit coming from the banks and 80 percent from the bond markets and specialist credit funds like ourselves”.
“The market is becoming more interesting by the day. In the long run we think institutional investors will respond to the fact that banks have no intention of lending to companies in the way they used to,” he added.