The firm has appointed Tom Glover, who was head of North America fund finance at Investec, as operating advisor to help develop a GP and net asset value-based lending strategy, according to a statement.
The strategy will provide portfolio-based NAV loans and preferred equity investments to private equity funds across the risk/return spectrum. The strategy is flexible on the debt/equity mix given where a particular deal sits on the continuum of risk and yield targets, a spokeswoman for the firm told affiliate title Private Equity International.
The capital will come from a variety of vehicles, including BCP Credit’s “Special Opportunities” vehicle and business development companies.
BC’s credit group expects to lend $250 million per year, targeting loans in the $20 million to $200 million range, with an additional capacity to scale up from managed vehicles and co-investments. The firm will lend against the NAV of alternative managers’ funds, GP management fees, GP co-investments and expected carry, according to the spokeswoman.
The strategic fund financing sector is experiencing an “explosion in creativity and activity”, Glover said in the statement.
Credit players with dedicated fund financing strategies are few and far between, and it is unsurprising to see new entrants, as Private Equity International reported in February.
“The [fund financing] market has a lot of appetite for complexity right now, because people believe complexity will drive returns,” said Sunaina Sinha, managing partner and founder of London-headquartered placement agent and advisor Cebile Capital.
Concentrated NAV lending enjoyed a coming of age in the covid-19 era as managers faced liquidity needs and sought to understand funding options amid the uncertainty, PEI examined in February.
By the end of last year, the fund financing market shifted toward an opportunistic focus as public markets rebounded, Paycheck Protection Program loans started to hit, and M&A activity soared.
“Covid has undoubtedly brought NAV lending to the fore,” Doug Cruikshank, head of fund financing at Hark Capital, part of Aberdeen Standard Investments, told PEI in February. “But concentrated NAV is not the product of covid. This is a natural progression of liquidity provision across the life of a fund. I have no doubt that it is an enduring trend.”
– This story was updated to include secondaries funds in the third paragraph.