What the Last 5 Years Really Taught Us About Private Credit
Fundraisings from Coller Capital, Kartesia, Pinegrove, Mizuho and Equita Capital.
👋 Hey, Nick here. A big welcome to the new subscribers from AGF Capital Partners, Houlihan Lokey, and Ballingers. This is the 122nd edition of my weekly newsletter. If someone forwarded this to you, you can subscribe here and read my previous articles here.
📕 Reads of the Week
Private credit holdings by the wealthy have grown 2.5-fold in the past three years, four times faster than the traditional institutional business. Link
AlbaCore challenges conventional thinking in European direct lending. Link
BlackRock tried private credit once before. Will this time be better? Link
Blackstone is considering launching a dedicated private credit secondaries strategy. Link
🎧 HPS is building out its NAV lending. Link
Schroders surveyed 1,000 institutional investors and wealth managers overseeing approximately $67 trillion in assets. Nearly half of insurers identified private debt and credit alternatives as their top return opportunity, ahead of both private and public equities. It was also the top-ranked option for income generation. Read the full report here.
Why DFIs Still Hold the Keys to Emerging Markets Private Credit. Phenix Capital’s Impact Debt Report. Link
Briarcliffe Credit Partners, a US-based placement agency dedicated exclusively to private credit, announced the acquisition of Branch Advisory, a European placement agent. Link
now: pensions, the London-based $8.2 billion pension provider, announced its first investment in private markets with an allocation to UK affordable housing. This investment supports now:pensions’ ambition to invest at least 10% of its default fund in private market assets, including at least 5% in the UK by 2030. Link
🏦 Partnership of the Week
Legal & General will invest up to 10% of its annuities in Blackstone’s investment-grade private credit. The partnership combines L&G’s leading positions in pensions, including its $122.5 billion annuities book and $1.4 trillion in assets under management, with the strength and scale of Blackstone’s $465 billion credit platform. More here
Apollo-backed Athora announced its $7.7 billion acquisition of Pension Insurance Corporation Group, one of the UK’s leading pension solutions providers. The acquisition will create one of Europe’s largest insured savings and retirement services businesses. It will also increase Athora’s AUM to ~$160 billion, nearly double the year-end 2024 level. More here
For a side‑by‑side look at Blackstone and Apollo’s differing partnership approaches, see Covenant Lite’s latest post. Link
Blue Owl partnered with Voya Financial, a U.S.-based retirement solutions provider. Voya serves more than nine million retirement plan participants, who hold over $630 billion in defined contribution assets on its platform. The strategic partnership will offer private markets strategies in vehicles tailored for defined contribution retirement plans. More here
Blue Owl announced its partnership with Koda Capital, Australia's largest independent wealth manager. The partnership will allow Australian financial advisors and their wholesale clients to invest in Blue Owl’s middle-market BDC, Blue Owl Credit Income Corp. More here
📊 What the Last 5 Years Really Taught Us About Private Credit
Some say private credit hasn’t been tested. Alliance Bernstein disagrees.
The last few years have delivered plenty of stress for investors.
A global pandemic
A sharp rise in inflation and interest rates
Sweeping US tariffs
Periods of stress often yield lessons for nimble investors and here are Alliance Bernstein’s three key takeaways.
Click here to see all five key takeaways.
It’s All About the Alpha
Corporate direct lending is no longer exotic. While performance across the asset class has been strong over many years, largely supported by accommodative monetary policy, it’s misguided to believe that a rising tide will continue lifting all boats.
One defining feature of the US corporate direct lending market is its fragmentation:
Different sectors,
Different sponsors
Different sizes
Different structures and solutions
The percentage of portfolio holdings that managers have in common remains extremely low. Simply put, not all direct lenders are alike.
As default rates and other signs of stress emerge across this asset class, the impact is anything but uniform across companies and managers.
Consistent historical returns may have fostered a perception of private credit as a beta-driven market, but looking ahead, Alliance Bernstein believes alpha will be the key differentiator.
Interestingly, KKR made a similar argument two years ago. Link
The Consumer Isn’t a Monolith
The sprawling consumer sector remains the heart of asset-based finance, and higher-for-longer interest rates have caused stress. But the details matter when it comes to consumer underwriting. That puts a premium on underwriting experience and insight.
Loan purpose and repayment hierarchy matter. For example, auto loans typically rank high in repayment priority, whereas loans aimed at consolidating credit card debt warrant greater scrutiny.
For a deeper dive into these nuances, In the Gaps is well worth a read. Link
Recurring Revenue: It’s Not Created Equal
Alliance Bernstein has long believed in the value of lending on a recurring revenue basis to Software-as-a-Service providers that offer critical solutions for enterprise resource planning. However, not all recurring revenue is created equal, and revenue quality demands careful attention.
As interest rates and the cost of capital soared, the surge in tech spending that began during the pandemic began to wane. Elevated rates also compressed SaaS company enterprise values, tempered growth trajectories, and pressured customers, many of which began scaling back spending on software licenses.
Many lenders that extended too much leverage during the low-rate environment have learned this lesson the hard way.
Lenders must first identify businesses with resilient value propositions and a demonstrated ability to navigate cycles, then calibrate loan sizes accordingly.
Read all the key takeaways here.
💰Fundraising News
Coller Capital closed its $6.8 billion Credit Opportunities II. The successful raise follows the firm’s pioneering $1.4 billion first credit fund, CCO I, which previously set the benchmark as the largest private credit secondaries fund. CCO II targets senior direct lending and high-quality performing credit investments across LP-led and GP-led opportunities. Coller Capital has seen $53 billion of secondary credit investment opportunities since January 2024, with substantial growth anticipated as more private credit funds mature. More here
Kartesia, a London-based asset manager, closed its $1.5 billion Credit Opportunities VI fund. The fund lends across the capital structure to predominantly sponsorless lower mid-market companies in Europe. Past vintages have returned over €2.3 billion to investors at IRRs exceeding 14%. More here
Pinegrove Capital Partners, a California venture investment platform, is raising an $800 million Innovation Credit Growth Fund X. The fund will finance senior secured loans to VC-backed growth companies and is aiming for net returns of 13% to 17%. Pinegrove was established in 2023 through a partnership between Brookfield and Sequoia Heritage. The firm deepened its presence in venture finance last year by acquiring SVB Capital. More here
Mizuho, a Japanese bank, raised $97 million for its Upsider Blue Dream Growth Fund 2. The venture debt fund targets Japanese technology startups and invests up to $7 million per company. More here
Equita Capital, an Italian asset manager, announced a final close of $190 million for its third private debt fund. The fund lends to SMEs in Italy, the DACH area, and Spain. It also qualifies as an Article 8 product under the European SFDR. More here
This newsletter is for educational or entertainment purposes only. It should not be taken as investment advice.