Diversifying private-credit portfolio targeting double-digit returns and downside risk management
Investment Approach
Direct origination of borrowers. Creation of bespoke financing solutions. Typically one-to-one negotiations to secure favourable lending terms negotiations to secure favourable lending terms.
Investment Opportunity
Exposure to an inefficient market aiming to provide a differentiated and alpha-rich proposition to investors
Investment Universe
Performing Western European non-sponsored, asset-rich companies seeking EUR5-15m flexible growth or other funding
Demand for private credit in Europe is growing as banks retreat from lending and small/mid-sized firms seek flexible financing solutions
Non-sponsored borrowers are often under-served, located in small and medium-sized cities. Lenders who can structure bespoke and timely loans can command attractive terms
An emphasis on downside risk management and focus on non-sponsored loans (typically lower loan-to-value ratios and stronger lender protection) can improve risk-adjusted return potential
With many more non-sponsor than sponsor-based borrowers, the opportunity set is larger and more diverse - by both sector and geography; correlations are relatively low
The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios.
Changes in the relative values of different currencies may adversely affect the value of investments and any related income.
There is a risk that the issuers of fixed income investments (e.g. bonds) may not be able to meet interest payments nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and therefore investment loss.
The value of fixed income investments (e.g. bonds) tends to decrease when interest rates rise.