(MENAFN- Live Mint) Amundi SA and First Eagle investment Management are looking to raise as much as $5 billion for a new private credit strategy that will offer wealthy individuals in Europe, the Middle East and Asia access to private loans made to mid-size US companies.
The fund will use a perpetual,“evergreen” structure to draw high-net worth individuals who might otherwise face barriers getting into the burgeoning $1.7 trillion private credit market. It will also be open to other kinds of investors including institutions, family offices and asset managers.
Unlike traditional draw-down fund structures which require investors to make one commitment upfront and lock up their capital for as long as 10 years, evergreen investors can periodically redeem all or a portion of their stake.
Evergreen funds are“very convenient for investors who don't want to continuously underwrite a private fund every three to five years, which can become cumbersome,” Michelle Handy, First Eagle's chief investment officer for direct lending said in an interview.“They simply do one underwriting and then decide whether they want to allocate more or exit further down the line.”
They are gaining in popularity among private credit managers: Blackstone Inc. and Ares Management Corp. have already raised more than €1 billion for theirs, according to publicly available filings.
In the US, individual investors have made inroads into private credit through business development companies, or BDCs, which tend to be run as publicly traded closed-end funds.
Evergreen funds“can help democratize access to private credit, in particular for more liquidity-focused investors and retail investors,” said Emma Bewley, head of credit at Partners Capital, an outsourced investment office which serves investors including endowments and foundations.
For lenders, a big advantage is they can keep fund-raising throughout the life of the fund. As of June 30, the First Eagle and Amundi strategy has raised more than $450 million from mostly institutional investors, according to spokespeople for the firms.
The tie-up stands out among European evergreen funds by deploying capital in North America. While First Eagle will ultimately invest the capital, Amundi will help attract investors based outside of the US.
Unusually, the fund will focus mostly on lower mid-market assets where pricing is better, leverage is lower and financial covenants more robust than on larger deals, Handy said.
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