Don’t be fooled into considering that senior direct lending is new territory for AlbaCore Capital Group, says Luke Gillam (pictured), regardless of the agency launching its first devoted fund within the asset class.
The non-public credit score specialist has been offering senior loans from its broader platform for years. However AlbaCore determined it now wanted its personal technique throughout the franchise. This was partly pushed by the worth AlbaCore noticed in senior credit score following rate of interest rises in 2022 and partly pushed by restricted associate demand. Certainly, the fund launched with vital commitments from Mitsubishi UFJ Belief and the Abu Dhabi Funding Authority.
To arrange the fund, AlbaCore introduced in Gillam as head of senior direct lending in October 2024 from Goldman Sachs, the place he had spent 20 years, latterly as head of EMEA credit score capital markets.
The fund, which introduced its first shut at $1.8bn (£1.4bn) in capital, will goal primarily sponsor-backed companies which have greater than €35m (£30.3m) to €40m EBITDA.
Gillam says “you’re extra more likely to get market leaders, worldwide diversification, product diversification and a stronger franchise” on this a part of the market.
Geographically, the fund will largely concentrate on companies within the UK, France and Germany, adopted by some publicity to Southern Europe, Benelux and the Nordics.
And like many different lenders on this unsure time interval, the fund will concentrate on defensive sectors reminiscent of software program know-how, enterprise providers and healthcare. He’s conserving an open thoughts about shopper and industrial sectors although, the place he says are some good firms price lending to. The fund hasn’t made any investments but however is within the technique of closing numerous offers within the coming month or so.
Learn extra: AlbaCore Capital promotes head of analysis to associate
The senior lending staff may have seven folks devoted to origination. To be able to increase origination capabilities, many non-public credit score managers have turned to tie-ups with banks lately. Regardless of coming from a banking background, Gillam says there aren’t any plans to comply with that development.
“We actually like the pliability to have the ability to exit and supply immediately with non-public fairness,” he feedback. “That’s actually the main target, relatively than one thing which we really feel is likely to be extra slender. A tie-up with a financial institution might be extra regionally centered.
“We like the pliability of having the ability to originate throughout Europe and concentrate on direct bilateral relationships relatively than going through a tie-up.”
Nevertheless, he says it is going to be attention-grabbing to see how effectively these joint ventures work. The place the alignment of curiosity between funds and the banks are robust, it could possibly work rather well, in his opinion.
However he provides that he’s “not satisfied that in a few of these [partnerships], the alignment of curiosity is that good”.
An attention-grabbing dynamic within the present market surroundings is the rising curiosity in European direct lending versus the US. The US, as a much bigger and extra mature market, has all the time accounted for the majority of direct lending offers. However traders are turning increasingly to Europe to seize higher returns.
“Once I began [at AlbaCore] late final 12 months, this narrative round US exceptionalism was actually dominant and we have been considering by the professionals and cons of US versus Europe,” says Gillam.
“We truly felt we had a fairly good story why Europe was higher than the US, however we have been frightened concerning the macro view biasing folks’s views. Now I believe you’re preaching to the transformed as a result of folks actually can see the advantages of Europe. There are much less aggressive spreads, tighter buildings and general I believe it’s barely much less aggressive. But additionally, now the macro theme is switching away from that US exceptionalism in direction of extra positivity about Europe.”
