TCP raises nearly $2bn in one of 2018’s first fundraises

The firm’s lending strategy includes investing in companies both with and without the backing of a private equity firm.

Tennenbaum Capital Partners has rounded up $1.9 billion to invest in mid-market companies, the Santa Monica, California-based alternative lender said on Tuesday.

The firm raised that money across its commingled TCP Direct Lending Fund VIII and related segregated accounts. Limited partners making commitments to the vehicles included pension funds, endowments and foundations, insurance companies, sovereign wealth funds and family offices, both in the US and abroad. The firm will target directly originated, performing senior secured debt.

Most of the position sizes in the portfolio will be in the range of 2-4 percent of committed capital to the fund, with the firm targeting high single-digit to low double-digit returns on an asset level, said Lee Landrum, a TCP managing partner.

He said it is always challenging to predict the specific future mix of deals involving a private equity sponsor and those without, but he noted that TCP has historically executed a “healthy mix” of both.

The New Mexico Public Employees’ Retirement Association’s $200 million segregated mandate set up in October 2016 was done so in connection with Fund VIII, a person familiar with the situation said.

The vehicle has a 1 percent management fee on invested capital and a 12.5 percent carried interest, according to the October meeting minutes. The mandate will target a 9-12 percent net internal rate of return and a 6-9 percent cash yield.

An earlier fund, the Tennenbaum Waterman Fund, which raised at least $180 million from several investors, including the Orange County Employees’ Retirement System and the San Bernardino County Employees’ Retirement Association, according to OCERS meeting documents. The fund had posted an 11.34 percent net internal rate of return and a total value paid in ratio of 1.34x as of 30 June.

The firm applied a leverage of 1:1 on the vehicle and charged a 0.90 percent management fee on invested capital, including leverage, and a 10 percent carried interest over a 7 percent hurdle rate. The fund has a seven- to nine-year life with a two- to three-year reinvestment period.

TCP manages $9 billion across direct lending and special situations strategies. In addition to its Southern California headquarters, the firm maintains offices in Atlanta, New York and San Francisco.