Sagard has held a final close of its Sagard Credit Partners II fund on $1.17 billion, surpassing its $1.1 billion target.
Like its predecessor, the manager’s second credit fund focuses on non-sponsored companies with EBITDA of less than $50 million. That is a market that is both “underserved and ginormous”, Adam Vigna, chief investment officer of Sagard, told Private Debt Investor. About 60 percent of the portfolio companies are Canadian, he said.
The latest fund, SCP II, is Sagard’s largest so far, and was launched in the fall of 2020, according to the manager. It received commitments from both new and existing institutional and strategic investors from the US, Canada and Europe.
“There’s a lot of capital chasing the sponsored market,” Vigna said in the interview. He noted that whereas that part of the market tended to use higher leverage, weaker documentation and capture less return, the non-sponsored market offered better pricing, lower leverage and better documentation.
The non-sponsored market “is a super attractive space with a wealth of companies seeking capital”, Vigna said. Amid current market dislocations, traditional banks are continuing their retreat from lending to small and mid-sized companies. In addition, the continuing impact of covid-19 and the economic cycle had made it more difficult to access traditional financing in North America’s middle market, he said in the statement.
Vigna told PDI that the fund has been targeting gross returns of more than 14 percent, and net returns to limited partners of about 10 to 12 percent. He noted that the Sagard funds are able to achieve those returns without using leverage. He said the firm’s portfolio companies fared “exceptionally well” during the pandemic, and that the manager spends a lot of time with portfolio companies to prepare them to adapt and navigate the current uncertain macro environment.
The predecessor fund, SCP I, focused on directly originated loans to North American companies. It closed in December 2018 on $557 million, and has invested in 15 businesses, with 11 fully realised deals, Sagard said in the statement. SCP I has generated $548 million of realised proceeds, representing 79 percent of all capital invested. The latest fund – SCP II – has deployed about 11 percent of its capital.
Sagard, in the release, named some of the investors in the new fund. They include Beneva, BRK Capital; Civil Service Superannuation Board of Manitoba; Desjardins; Great-West Lifeco; HDG; Hewitt Group; HOOPP Capital Partners; IGM Wealth Management; Investment Management Corporation of Ontario; Kruger; Mackenzie Financial; Optimum Asset Management; and Ville de Montreal.
Toronto-based Sagard is a multi-strategy alternative asset manager with more than $14 billion of assets.