Golden Gate credit business seeds fund with secondaries capital

A credit provider owned by Golden Gate Capital has used the secondaries market to help raise its debut third-party fund.

Angel Island Capital held a $440 million final close on AIC Opportunities Fund II, which was seeded with a diversified portfolio of mid-market private credit assets, according to a statement.

This portfolio was brought off the firm’s balance sheet by a syndicate of investors and placed in a closed-ended, commingled fund structure, Secondaries Investor understands.

The deal structure was designed to provide visibility to incoming investors to “attract primary and secondary investors on an accelerated basis”, the statement noted. Investors also provided follow-on capital.

The make-up of the syndicate and the ratio of secondary to primary capital was not disclosed.

There is an estimated $88 billion of net asset value in credit funds of between five and 10 years old, Campbell Lutyens partner Gerald Cooper, who advised on the deal, told Secondaries Investor.

“Over the past several years secondary buyers have underwritten LP portfolio sales on an unlevered basis to somewhere between 11 percent to 13 percent. If you could buy a credit portfolio with similar returns, but [with] much better protection, that seems like it would be a good trade.”

Having an allocation to credit makes sense in terms of optimising portfolio composition for secondaries buyers, he added.

The deal is one of a growing number of GP-led processes carried out primarily to expand the investor base rather than to provide liquidity. Manulife, Tikehau Capital, Investcorp and Eurazeo are among the firms to have completed similar deals, Secondaries Investor has reported.

San Francisco-headquartered Golden Gate is structured as a private holding company, maintaining ownership of companies for an indefinite period. Angel Island Capital manages approximately $3.7 billion in assets across a range of credit strategies.