The Fund Finance Association wants to say thank you again to all those who attended the 13th Annual Global Fund Finance Symposium and remind you to save the dates for the upcoming global symposiums!
The Bank of England this week flagged concerns about the financial stability risks posed by private equity in light of higher interest rates and the resulting pressure on valuations. While the announcement has been widely covered in the financial media, no concrete actions were announced. The BoE’s Financial Policy Committee plans to report back on its analysis at a June meeting.
Global M&A deal value jumped 30% to $690 billion in Q1 according to London Stock Exchange Group data cited in the Financial Times. We have previously suggested that the recent easing in financial conditions could support improvement in investment, exit, and distribution trends in private markets. Dealmaking activity during the quarter, however, skewed to larger transactions, and the recovery in Europe outpaced the improvement in the U.S.
The direct lending share of global private debt fundraising declined again 2023 after reaching an all-time record of 47% in 2021, according to data from Pitchbook. Until the 2012, distressed, special situations, and mezz strategy funds dominated private debt fundraising, accounting for as much as 90% of dollars raised in 2006, and reflecting interest and returns in difficult-to-access, non-commoditized fixed income. That interest appears to be making a return.
Meanwhile, Bloomberg reports that private credit funds are giving up fees to attract capital as competition between closed-end funds, BDCs, and banks intensify. Illustrating the point, Apollo recently waived the first year of fees on its Middle Market Apollo Institutional Private Lending BDC for its anchor investor Mubadala Investment Co.
NAV facilities come in all shapes and sizes and, unlike subscription facilities, there is no standardised collateral package for these kinds of transactions. In the European market, many lenders - particularly investment banks - are focused on ensuring that they have recourse to the underlying assets of the fund via their security documents. This might take the form of direct security over: (i) each of the topcos through which a fund (indirectly) owns the relevant underlying portfolio company; (ii) any aggregator vehicle through which the fund (indirectly) owns all or a large number of the underlying portfolio companies; or (iii) a combination of (i) and (ii). Recently, we have seen an uptick in the number of financings in Europe that are structured as what are commonly referred to as “security-lite” transactions: these transactions involve no security being granted over the underlying assets of the fund, with lenders (often non-bank in this context) only given secured recourse to the bank accounts into which distributions from the fund’s investments are paid. In this article, we shine a light on some of the key factors to take into account for these kinds of transactions.
Join partner Leah Edelboim as she sits down with Adam Zotkow from Goldman Sachs for a captivating Industry Conversation.
Join Women in Fund Finance for Wine-d Down Wednesday at Fotografiska Museum NYC, where you can connect over world-class photography and wine!
“Increasing allocations will come down to cash flows,” according to Bain & Co. in its recent Global Private Equity Report 2024. The practical impact of net cash flow position for buyout fund investors, reflected in DPI, will be a primary driver of fundraising in 2024.
CalPERS will be upping its private market allocation to 40% of plan assets, after a board decision on March 18. PE will increase to 17% from 13 and private debt to 8% from 5% of plan assets.
Blackstone’s purchase of $1.1 billion in credit card receivables from Barclays and KKR’s acquisition of a $7.2 billion RV loan portfolio from Bank of Montreal illustrate a trend of private credit expansion into asset-backed finance. Continued balance sheet pressure at banks suggests more such transactions may be coming.
Texas Permanent School Fund announced that it will replace BlackRock as manager on $8.5 billion of investments.
Our readers have been blessed with wonderful Fund Finance Friday articles dealing with the maintenance of collateral accounts in 'When Deposits Don’t Travel with Loans', control over collateral accounts in 'Control or Control Agreement' and lastly, events of default in 'Common Events of Default in Subscription Credit Facilities: How Parties End Up Here, and Recommendations for Avoiding Preventable EODs'. In this article we explore the circumstances under which lender may take action with respect to collateral accounts, often called Cash Control Events.
On February 7 2024, the European Union adopted a final text amending the AIFMD and UCITS directives (AIFMD II). In a recent Client & Friends Memo authored by Michael Newell and Alix Prentice, we focus on loan origination funds and the novel rules applying to them in terms of scope, leverage requirements and liquidity management requirements, as well as important considerations for the grandfathering period as these entirely new rules come into force locally across Europe.
Read more here.