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Alternative Market Briefing

Investors seek niche opportunities in private credit

Wednesday, May 16, 2018

Bailey McCann, Opalesque New York:

Allocators of all types have been plowing money into private credit opportunities at a record pace in the past few years. According to data from Pensions & Investments, private credit strategies saw $10 billion of inflows in 2017 a 57 percent increase over 2016.

There seems to be an appetite for more - investors packed two rooms at investment consultant NEPC's client conference in Boston today to listen to a panel on niche private lending strategies. The panel focused on lending that falls in the gap between venture debt and basic cashflow lending. Funds in this space provide financing to companies that aren't quite mature enough to stand on their own but will be able to with a little bit of funding to get to the next level.

"There are a lot of opportunities if you are willing to do the work," said Aron Dantzig, Managing Partner at Capital IP Investment Partners from the stage. "We're using covenants, we're setting revenue milestones and we are usually a senior secured creditor so there are guardrails in place for investors."

For investors that are willing to do the work, or at least back a manager that is the returns can be significant. Panelists were generally targeting mid-teens or higher unlevered IRRs.

Investors are becoming more comfortable with the idea of private credit even at an early stage as they hunt for yield across the credit landscape. That hunt has lead to a lot of competition and cove......................

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