Performance analysis: Adding strings to their bows

Two significant players in the European alternative credit sector reported their full year results in May; ICG and 3i. Though the context for each was very different, the year ending March 2015 was a successful one for both and they sent the same message – they will continue to broaden their credit offerings. 

First off, Intermediate Capital Group. They have reached a record volume of assets under management (€18 billion), which is a consequence of a record year for fundraising: €6.4 billion. Presenting the results to analysts on 20 May, chief executive Christophe Evain (pictured) confirmed that ICG will continue to grow by adding business lines to its platform. 

He cited statistics showing that private debt is attracting more interest from investors and claimed that that trend will continue. He also argued that single strategy managers are declining citing McKinsey research showing that single strategy managers’ share of assets had fallen from 45 percent in 2008 to 41 percent in 2013.

ICG has grown dramatically over the last five years and even over just the last two its expansion has been impressive. Since 2012, it has added a Japanese mezzanine joint venture, fully invested its first European direct lending fund, started raising capital for a US debt fund, established its debut Australia Senior Debt Fund and bought Credos Capital to widen its structured financing offering. 

Speaking to PDI in our May issue, Evain confirmed that ICG’s most recent addition, a secondaries team, was unlikely to be the last new venture for the group. He didn’t give much away about what those new lines might be, but other acquisitions are far from ruled out. 


For 3i Debt Management, the latest set of full year results was also very positive. They confirmed that the credit platform is now the group’s primary third-party fund management business, making up more than half of the firm’s assets under management. 3i DM’s assets grew 12 percent year-on-year to £7.24 billion ($11.4 billion; €10 billion).

This is a significant development for a group that is known as a private equity house. But with the completion of a three-year restructuring programme, the equity side of the business is taking a back-seat, and chief executive Simon Burrows confirmed that 3i would not be raising a new third party buy-out fund, opting instead to finance any mid-market LBOs with the firm’s own capital. 

Instead, debt will dominate. Fee income from debt management grew from £32 million to £34 million over the past year, and the firm structured six new CLOs in the 12 months ending in March, including Jamestown VI, at $750 million its largest US vehicle to date. It also reached a €250 million first close on its European Middle Market Loan Fund, and other new initiatives are also in the works, PDI understands.


It is not just the Europeans who are looking to grow of course, Highbridge is plotting a move into European asset-backed lending while AllianceBernstein is getting its direct lending platform off the ground. 

Whether for good or bad, the growth of a company has become one of the most important measures to both investors and commentators. And for private debt managers – many of whom are still in their relative infancy – growth is not just natural, it is essential. 

But not every new business line will be a roaring success. So investors must be aware – growth is good, but it still carries risk.