Spain’s Incus closes on €650m hard-cap

The firm’s fourth credit fund will target asset-backed opportunities amid a volatile market, as investors look to diversify their portfolios.

Incus Capital, the Madrid-based fund manager, has closed its European Credit Fund IV on its hard-cap of €650 million, a step up in size from the “one and done” third fund, which had just one closing on €500 million.

The fund differentiates itself with a focus on asset-backed investments in European small to medium-sized enterprises. It has been doing deals in its main target areas of infrastructure, renewables and real estate since July this year.

Currently celebrating its 10th anniversary, Incus has more than 35 professionals across its offices in Madrid, Lisbon, Milan and Paris.

Managing partner Andrew Newton highlighted current market conditions as an opportunity for the firm. “We are delighted to have gathered a large pool of investable capital at this difficult moment in the cycle,” he said in a statement. “We’ve seen demand from SMEs for flexible solutions expanding as uncertainty over inflation and economic growth affect the capital and bank markets.”

Speaking to PDI, partner and chief operating officer Martin Pommier said the firm’s first fund was an opportunities vehicle with a “super-flexible” mandate that included investing in defaulted loans. For the next three funds the focus has been on “pure speciality credit”.

As a move designed to capitalise on its origination platform and knowledge of assets, the firm also launched infrastructure equity and real estate equity strategies a few years ago. Incus is currently in the market with a second infrastructure equity fund after its first one raised €350 million, while its first real estate equity fund is currently in the market with a €150 million target.

Pommier said Incus sees itself as a capital solutions firm, which means having both debt and equity options is useful. “A company might come to us for equity but decide to opt for debt because it’s cheaper, or might come to us for credit, but we decide we want to be in the equity,” he said.

Asked how the latest fundraising had proceeded through a difficult macro environment, Pommier said: “Due to geopolitical events, some investors paused. But it didn’t really affect us that much. There’s always an event of some kind, whether Brexit, covid or the denominator effect.”

He said Incus was attractive to investors because it had the potential to add alpha to portfolios initially constructed around beta and now wanting more specialist credit solutions. Incus targets returns in the mid-teens.

Incus typically targets deal sizes in the range of €20 million to €50 million, which in Pommier’s view is below the radar of London-based funds. To stay under the radar, he says Incus imposes a limit on the amount of capital it wishes to raise. Around 70 percent of deals the firm does are first-lien.

Having focused mainly on secondary opportunities between 2012-14 and then switched to mainly primary deals, Pommier thinks the proportion of secondaries deals could once again be likely to rise as firms become more active after the rate movements. He says the firm is agnostic as to whether it does primary or secondary transactions.