Attracting the eye of the investor is what powers the fundraising merry-go-round. As soon as one fund is underway, thoughts turn to its successor.
Catching the attention of institutional investors is harder in private debt as the asset class grows in popularity. It’s why managers need an edge, whether it’s a good track record, experience through more tumultuous times, or a sizeable team.
For the German insurance group Talanx Asset Management, which has €120 billion in assets under management, all of these qualities are relevant. But origination capabilities are one of their chief interests. “We have a preference for managers who are originating and leading transactions, rather than playing a participatory role. We pay close attention to their sourcing capabilities, and where the team is based,” say Andreas Asche and Michael Kebbel, senior portfolio managers at Talanx.
“We don’t like managers that try to cover too much of the market – we like some degree of specialisation. There are a lot of local factors to take into account in Europe. For example, do they have a local presence and expertise in all the relevant jurisdictions?” adds Asche.
Asche is broadly optimistic about the future of the asset class. As banks continue to withdraw from mid-market lending, debt funds will step in and provide the necessary financing to mid-market companies. But distinguishing strategies in Europe is difficult as it is a comparatively youthful market compared with the US.
“In the US, the track records are generally much longer. We look at the performance pre-financial crisis and also how the assets performed during the crisis. This helps us become confident in the manager’s ability to deal with an entire credit cycle.
“In Europe, it is harder to assess the track record. We ideally want managers who have had experience through the cycle. We take a look at single loans and how they have performed,” they say.