Manulife Investment Management, the investing unit of Canada’s largest insurer, entered the secondaries world this month with the appointment of two veteran bankers from Houlihan Lokey to build a unit focusing on GP-led processes.
Secondaries Investor reported on 18 October that the Toronto-headquartered firm, which has around C$1.1 trillion ($837 billion; €752 billion) in assets under administration, had appointed Jeff Hammer and Paul Sanabria, former co-heads of Houlihan Lokey’s illiquid financial assets practice, to run a principal investing unit focusing on the strategy.
We caught up with Hammer, Sanabria and global head of private markets Stephen Blewitt to learn more about the unit’s plans. Here are three things we learned:
Mid-market is the focus
Hammer and Sanabria worked mainly with mid-market GPs during their decade at Houlihan Lokey and will continue to focus on this segment of the market at Manulife. They plan to invest between $50 million and $150 million in deals, though they may also participate in larger transactions as a syndicatee.
“Manulife has good connectivity with middle market sponsors through its other private market investment strategies, which we would expect to leverage,” Hammer said. “That is a natural avenue for us to pursue.”
The strategy won’t be ‘exotic’
In addition to advising on brand name private equity and private debt GP-led transactions – think Bain Capital‘s restructuring over the summer of two pre-financial crisis credit funds – the pair have made a name advising on some of the more complex deals, such as aircraft leasing and life settlements.
“We are not going to be investing in those exotic asset types,” Hammer said. “This is a down-the-fairway private equity and private credit strategy.”
The secondaries opportunity in private credit is “massive”, Sanabria added. He said a large amount of capital has been raised for direct lending, business development companies and collateralised loan obligations – markets that have yet to experience a downturn. “When the credit markets turn, you are going to see much more active portfolio management within funds or other pooled structures.”
Sanabria said deal types in this sector will include LP and shareholder-type transactions as well as those involving underlying assets.
Manulife may launch strategy-specific funds
The insurer will not be a “one-strategy shop”, according to Hammer. Manulife plans to raise third-party capital funds and separately managed accounts focusing on GP-led secondaries. These may ultimately be dedicated to separate strategies, such as private equity, private credit and, potentially, real estate and other real assets.
Blewitt declined to comment on how much the firm would target in third-party capital for a fund. Hammer said that, for now, the unit was investing from a “significant” balance sheet commitment, though he declined to give a specific figure.