(Bloomberg) -- Private credit funds are diversifying into Latin America to drum up new investors as the $1.7 trillion industry endures the worst fundraising slump since 2020.
The likes of Adams Street Partners, Antares Holdings and Hayfin Capital Management are just a few of the firms eyeing growing pots of cash at pension funds as well as among wealthy individuals in the region.
“Capital is becoming scarce in the US and Europe, with funds struggling” to secure investment renewals, said Philippe Stiernon, CEO and managing partner at ROAM Capital, a Latin American alternative asset placement agent. “This challenging environment is pushing managers, even top-quartile ones, to diversify beyond their home markets.”
Many institutional investors in the US and Europe are full up on private credit, with allocations by some major pension funds and insurance companies surpassing 30% of assets. To deal with the problem of saturation, private credit funds have been going further afield, including the Middle East and Asia, or designing funds aimed at retail buyers.
In Latin America, private lenders can capitalize on growing wealth and a need by investors to offset risks in their domestic debt markets. Investing in loans of mostly unlisted American companies is seen as a safer bet.
“Pension assets in Latin America have grown a lot over the last decade or two,” said Jeff Schlapinski, managing director of research at GPCA, the global industry association for private capital in emerging markets. “They’re showing more appetite for alternatives, and investing in US managers. It has been a growing source of capital.”
Retirement managers in Mexico have been allowed to allocate cash to foreign firms since a 2017 law lifted restrictions.
In one of the latest moves, Muzinich & Co. has relocated its Madrid-based director in sales and marketing Jesús Belascoain to Miami to cover Latin American investors. Ares Management Corp. last year linked up with Brazilian firm Vinci Partners Investments Ltd. to distribute its products.
Brazilian hedge funds have been more active buyers of private and structured credit in recent years. They’ve been amassing more assets against a backdrop of an expansion of average wealth in the nation of more than 350% in the 15 years since 2008, according to UBS’s Global Wealth Report. Meanwhile, new legislation increased the tax burden for wealthy Brazilians who invested in hedge funds through exclusive funds, but cut taxes for local private credit funds.
Lenders are hoping that will make them a receptive audience for their offshore-based credit funds.
“Latin America is still relatively new to the alternative investments landscape, representing the last major frontier for LP growth,” said Stiernon at ROAM.
Deals
- The private equity owners of Foundation Consumer Healthcare, the company behind popular morning-after pill Plan B One-Step, are in early talks with lenders to explore options that include refinancing debt
- Private credit fund managers have provided a €1.1b unitranche loan priced at Euribor+475 bps to German property-management software maker Aareon AG
- Banks and private credit funds are competing to provide a debt package worth about €1.5 billion ($1.6 billion) to finance the buyout of Laboratorios Farmaceuticos Rovi’s CDMO unit
- Chinese distressed builders Logan Group Co. and KWG Group Holdings Ltd. are close to signing a private loan to refinance a HK$10.2 billion ($1.3 billion) facility that backed the development of a luxury property in Hong Kong
- A group of direct lenders including Ares Management Corp. and HPS Investment Partners is providing a $3 billion credit facility to finance Carlyle Group Inc.’s potential purchase of Baxter International Inc.’s kidney-care division
- A consortium led by Golden Energy and Resources Pte Ltd. has signed a deal for a $600 million loan from private credit funds including Davidson Kempner Capital Management LP to pay for its acquisition of an Australian coal mine
- Golub Capital led a roughly $1 billion private debt facility to support TA Associates acquisition of Momentive Software
- Lenders led by Ares Management Corp. are set to provide a roughly $1.8 billion debt package to support Genstar Capital’s purchase of a stake in payments processor AffiniPay
- Private credit funds and banks are in talks to provide as much as €1 billion ($1.1 billion) to fund a potential buyout of French cybersecurity specialist Exclusive Networks SA
- Private credit fund managers are jointly arranging a debt package of around €1bn for French software company Orisha, after private equity firm Francisco Partners obtained exclusivity to buy a stake in the business earlier this month
- Health Catalyst, Inc., a provider of data and analytics technology and services to healthcare organizations, today announced it has entered into a five-year term loan facility for up to $225,000,000 with Silver Point Finance, the direct lending business of Silver Point Capital, L.P.
- Banks and private credit funds are competing to provide as much as £1.75 billion ($2.3 billion) to back a possible take-private of Hargreaves Lansdown
Fundraising
- Crestline, an alternative-asset manager, is exploring strategic options including a sale
- Fortress Investment Group, the firm backed by Abu Dhabi sovereign wealth fund Mubadala, said it expects to double assets under management to $100 billion as it pushes into private wealth and insurance
- AlbaCore Capital LLP is looking to raise more than €2 billion ($2.2 billion) for a new senior direct-lending strategy
- The higher interest rate environment has boosted the appeal of private credit for sovereign investors
- Private credit’s push to raise funds from retail clients is starting to put pressure on their profits.
- Oaktree Capital Management is partnering with Lloyds Banking Group Plc to provide the banking giant’s private equity clients with loans to fund their buyouts, the latest sign that traditional lenders are trying to find creative ways to get into private credit
Job Moves
- It was a takeover big enough to transform Brookfield Asset Management into a behemoth. Behind it was a young, ambitious executive obsessed with the details — making an impression on bosses that would put him on the path to become CEO
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