Muzinich & Co. Inc. has raised $500 million for its first private credit fund dedicated to the Asia Pacific region, seeking to capitalize on the rising popularity of the asset class.
(Bloomberg) — Muzinich & Co. Inc. has raised $500 million for its first private credit fund dedicated to the Asia Pacific region, seeking to capitalize on the rising popularity of the asset class.
Institutional investors contributed 80% of the money and the remainder came from family offices, according to Andrew Tan, the US firm’s regional chief executive officer, who also leads the private credit business.
Half of the funds come from investors in Asia. Singapore’s DBS Group Holdings Ltd. is the anchor investor with $200 million. It closed on Friday.
“Our investment focus is on transactions that afford us a strong level of collateralisation against the debt that we lend, as well as well covenanted,” he told Bloomberg. Education, healthcare, manufacturing, consumer goods and technology are areas where the fund sees opportunities, he said.
Private credit, which involves investment funds bypassing banks and lending directly to companies, has grown in popularity in recent years, as investors sought yield amid rock bottom central bank interest rates. Private credit loans typically come with floating rates of interest that are higher than bank debt.
Since its launch in 2021, the Muzinich Asia Pacific Private Debt I fund has lent around 35% to 40% of its money to eight entities, located in Australia, India, and Hong Kong. He declined to cite specific names.
The fund follows the firm’s investment principle of targeting lower middle market companies with earnings before interest, taxes, depreciation and amortization of $3 million to $30 million. In Asia, however, it has a slightly broader range.
Tan is targeting a return in the low to mid teens on the portfolio.
The fund is classified as an Article 8 financial product under European Union rules, and therefore does not invest in sectors such as thermal coal, gambling, distilled alcohol, and munitions. Muzinich also assesses a company’s environmental, social and governance credentials when making an investment.
While Asia constitutes just a small portion of the global pool or private credit assets, it is growing quickly. A Global Private Capital Association report said fundraising in the region last year posted a 42% increase versus 2021.
Tan is upbeat on Asia’s prospects.
“Businesses are still spending on capital expenditure and private equity sponsors are still spending on acquisitions,” he said.
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