- Mid-market deals in northern Europe a primary focus
- 12-month investment period for new credit strategy fund
- Banks and CLOs in Europe have struggled since crisis
“The goal is to capitalize on the opportunity set in the marketplace as we see it, with attractive relative value in senior secured loans,” Essex said.
The firm announced Nov. 14 that it had raised the equivalent of $800 million for the euro-denominated Partners Group Private Markets Credit Strategies 2013 fund. The new fund, the firm’s third for this strategy, is a significant step up from its inaugural 2012 vehicle, which raised $483.8 million last year, according to the Thomson One private equity database.
Partners Group, which has its headquarters in Baar-Zug, Switzerland, plans to focus on mid-market transactions, mostly new issue loans in the primary market, rather than more broadly syndicated deals, he said. The firm — which has a multi-strategy approach to investing in equity, debt, infrastructure and real estate — will prospect for investment deals by taking advantage of more than 550 LP interests that it has with private equity funds globally, Essex said. “Those relationships allow us to work directly with sponsors to find those opportunities to lend into.”
The firm expects to deploy this $800 million in the next 12 months to finance a diversified portfolio of 25 to 30 credits, and the fund is expected to have a five-year life cycle, which is generally consistent with the kind of senior secured term loans that portfolio companies typically take on, Essex said. “The large majority of the transactions we pursue are sponsor-supported deals. That historically is how we have sought to access the market.”
In addition to the two main credit funds, the firm also offered a smaller second fund in early 2013, which had a six-month investment period, Essex said. Partners Group said in its press release that it has identified this segment as attractive in the current market environment and intends to continue offering similar programs to its institutional clients on a regular basis in the future.
The business opportunity is likely to persist because European banks remain challenged with the aftermath of the financial crisis and new regulations such as the Basel III bank capital accords, Essex said. In addition, European collateralized loan obligations, an important vehicle for leveraged loans, have yet to rebound from the crisis, unlike the United States, which has seen strong CLO growth for the past three years. Essex said 75 percent of existing European CLOs are past their reinvestment period, and 97 percent of the remaining CLOs reach the end of their reinvestment period by the end of 2014.
The firm plans to invest in healthy credits, not distress, and will look primarily to the stronger national economies in Europe, such as Germany, the UK, the Nordic region and potentially France, but it has less interest in the more troubled southern part of the continent, including Spain, Italy, and Greece, he said.
Known LP investors in the Partners Group family of funds include Canada Pension Plan Investment Board, the Pennsylvania Public School Employees’ Retirement System and the New Jersey Division of Investment, according to Thomson One.