Pemberton raises € 3.2 billion for new direct loan fund
A little over 10 years ago, Symon Drake-Brockman was a senior executive at the Royal Bank of Scotland, the Edinburgh-based giant bank rescued by the British government after it nearly collapsed. Today, as a managing partner of Pemberton, a specialist asset manager, he has raised billions of euros for a new fund designed to take advantage of a radical overhaul of the lending market following the financial crisis.
Pemberton has raised 3.2 billion euros for a new ‘direct loan’ fund, which aims to provide senior secured loans to midsize businesses across Europe.
The fundraising brings the total assets under management of Pemberton, 40% owned by insurance company Legal & General, to € 5.5 billion, including a separate € 1 billion recently raised for a fund strategic credit investing in more complex operations.
The rising sum reflects continued strong investor interest in funds that aim to fill loopholes left by big banks such as RBS, which are under pressure from regulators to pull out of a range of riskier loans while that they are trying to improve their capital ratios.
Institutional investors such as insurance companies and pension funds have struggled to generate income in a world where trillions of dollars in bond purchases by central banks and very high interest rates. lows pushed developed market government bond yields to record highs.
Europe-focused direct loan funds have raised $ 11.1 billion in the first six months of this year, according to Preqin, the data provider, up from $ 8.5 billion in the same period a year earlier.
“I don’t think you’re in a bubble,” said Drake-Brockman, who has held positions at RBS including global head of debt markets and general manager of the banking and markets of the Americas division. “Basically, over the next 10 years, the banking system is going to shrink in Europe.
“Yes, there is capital that goes” into direct loans, he added. “Is there something of a mismatch right now [between capital and deals]? It is possible, but it is only in the short term. There are more than enough deals on the market to use dry powder [that direct lending funds have],” he said.
He stressed that the “trillions” of euros in assets should, he says, flow off banks’ balance sheets in the coming years, as regulatory stress tests discourage banks from holding certain types of loans.
Mr Drake-Brockman said that a large part of the loans made by Pemberton are aimed at mid-sized companies with turnover generally between 100 and 500 million euros, and are intended for their growth and their expansion, such as calls for tenders for competitors or the development of their activities.
Pemberton’s business leads come from a mix of relationships with banks, which use the company to provide financing to some of their corporate clients, and with private equity firms, he said. .
The company’s mid-market fund will target a yield of 7 to 8 percent per annum, while the strategic credit fund will target 10 to 12 percent.
Pemberton, who recruited more US and Asian investors with the latest fundraiser, is also planning to launch a second strategic credit fund and will start fundraising next year.
Additional reporting by Attracta Mooney