December 2016 saw Allianz Global Investors significantly boost its private debt capabilities. The firm had already entered the space, establishing an infrastructure debt presence in 2012. To this it added US-based private debt house Sound Harbor Partners, as well as two private-debt focused teams – a Germany-based corporate loans team and a US-based private placement team – from Allianz Investment Management, also part of Allianz Group.
Q:What was the impetus for boosting your capabilities at the end of last year?
We’ve been thinking about expanding the private debt platform for some time. We have a private debt team in Europe that does non-investment grade corporate debt located in France. They’ve been going for about two years. So we’ve been actively looking at how to build on that and grow our footprint in the space.
Q:How do you account for the growth in demand for private debt from investors?
Investors today are looking for opportunities where they can get an incremental yield. But, more importantly, where they can diversify their investments and where they can find investments that aren’t correlated to the rest of their book. So private debt just fills that really neatly.
The issue for a lot of investors in accessing these markets has been a lack of expertise. I think our focus on private debt now is in hiring teams that have the depth and breadth of expertise relative to their markets. So all of these [newly acquired] teams have been involved in these markets for a long time.
Q:Many private debt funds are young. What are your thoughts about strategies that haven’t been tested in a heavy recessionary environment?
If you look across who we have at AllianzGI, the heads of those teams all have significant experience and they’ve all lived through more than one cycle. And in their teams they have people with significant experience. So they aren’t people who are out there doing it for the first time.
Then there’s the assets. A number of the entities that we finance, whether they’re corporates or infrastructure, have been in existence for a very long time as well. It’s not all new construction or a company that came into being in 2010. And when we look to the credits – because each credit is reviewed individually – they’re subjected to a thorough analysis and stress cases to see what they look like in different economic environments.
Q:What’s next for the firm following the acquisitions?
We’re going to continue to look to fill the white spaces, in a variety of asset classes. There is lot that is going on in structured finance that we’re trying to get more involved in. Several members of the team have experience in structured finance.
We’re also looking at what else we could be doing in emerging markets too as well as impact funds, so we are exploring plenty of opportunities. It really has to do with building out the global platform, so we’re not prejudiced to any one particular part.