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Real Estate Credit Investments’ business has shown limited downside during the COVID-19 crisis (LON:RECI)

Real Estate Credit Investments plc (LON:RECI) is the topic of conversation when Hardman and Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: Your recent report on Real Estate Credit Investments sits behind a disclaimer. What can you tell us about that?

A1: It is just the standard disclaimer that many investment companies have. In essence, for regulatory reasons, there are some countries (like the US) where the report should not be read. It is not a simple asset class, and the report should only be looked at by professional/qualified investors.

Q2: Your recent report reviewed RECI’s sensitivity to rising rates. What can you tell us about it?

A2: In this note, we explore RECI’s low sensitivity to a rising rate environment by analysing i) borrower revenue sensitivity, ii) borrower debt sensitivity, iii) RECI’s portfolio risk mitigation techniques, iv) the MTM on the bond portfolio, v) the impact of RECI’s own funding mix, vi) international diversification), vii) previous share price experience, viii) sentiment to the stock, and ix) potential opportunities that may arise.

This reinforces the message in our last two notes that RECI’s business has shown limited downside during the COVID-19 crisis. We use a case study of a hotel exposure to illustrate how Cheyne’s management of challenging relationships materially reduces the final loss.

Q3: You talk of the borrower sensitivity to both revenue and debt. What exposures did you find there?

A3: Interest rates are most likely to be increased to take some heat out of the economy, and so dampen inflation. This will affect borrowers to varying degrees, with the biggest impact on those who are dependent on discretionary spend.

As at October 2021, nearly 50% of the book was Core/Core+, which means that it is steadily income-generating. Where an exposure is higher-risk, the lending criteria are tighter (by way of example, as at October 2021, the average LTV for development exposures in the top 10 was c.10% lower than the portfolio as a whole).

In some of the sectors, which may be regarded as having above-average borrower earnings risk, slides 17-20 of RECI’s October update provide useful and detailed information on why its specific exposures are not as bad as the sector exposure as a whole, and we review those in the note.

Q4: And how does RECI mitigate the risk of rising rates?

A4: Firstly, its high yields reflect intellectual capital, as well as risk. It is much easier to pass on a 50bp increase in benchmark rates if you are charging 8%-9% than if you are charging 2%-3% – so having a high-yielding book makes it less sensitive to market rate increases.

Second, the duration of lending is short – the average life of the loan book (£298m) at end-September was just 1.5 years.

Third, we have previously outlined the key cultural difference, whereby RECI staff “own” their loans, and are not employees of a large, faceless organisation, who might be likely to move on before problems emerge from their lending decisions.

Fourth, the turndown rate is high, at c.90%.

Fifth, the trend to covenant-lite lending seen in many larger corporate markets has not been prevalent in RECI’s markets.

Sixth, Cheyne typically does deals of between £50m and £200m (or currency-equivalent), so the equity contributor is usually a professional investor likely to take rate sensitivity into account.

Finally, we highlight the geographical diversity of RECI’s exposure, with the UK now accounting for 56% of funded fair value.

Q5: Your report also included an interesting case study of how Real Estate Credit Investments managed a hotel exposure through COVID-19. Can you elaborate on this?

A5: When COVID-19 struck, Cheyne immediately determined that risk was difficult to price, and paused all new deals. In the UK, it focused on its existing book of around 30 positions, and relatively quickly identified that a key risk lay in hotel exposure. Cheyne had closed the case study hotel deal a year earlier, but it was a complex situation, with 10 interested parties (each with different interests, jurisdictions of the parties, security, etc). It is testament to Cheyne’s expertise and reputation that it was chosen to lead the restructuring negotiations. Inter alia, these included taking control of the equity and re-financing all the senior debt, restructuring the parental support and equity, partially paying down the existing senior debt, and discussions with other operators in case the existing tenant failed.

After six months of intensive negotiations, in December 2020, a deal was struck, which saw the economic loss from COVID-19 spread between all parties and a financing package agreed on which the business could proceed. For RECI, it added some time to the duration of the loan, and saw a small reduction in effective spread, but it also saw an IRR at c.1.5x the dividend cost. Since the restructuring, trading has been better than planned. In our note, we go into why Cheyne was uniquely placed, resourced and skilled to manage the restructuring.

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Real Estate Credit Investments, Why rising rates should not hurt RECI

Real Estate Credit Investments plc (LON:RECI) is the topic of conversation when Mark Thomas joins DirectorsTalk Interviews.

Mark talks us through RECI’s sensitivity to rising rates, exposures to borrower sensitivity to both revenue and debt, how RECI mitigates the risk of rising rates and discusses a case study of how RECI managed a hotel exposure through COVID-19.

Real Estate Credit Investments is a closed-ended investment company which originates and invests in real estate debt which is secured by commercial or residential properties in Western Europe, – focusing primarily on the United Kingdom, France and Germany.

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Cheyne Capital Real Estate lends GBP103m for mixed-use Vauxhall development

Alternative investment fund manager Cheyne Capital Management (UK) LLP (Cheyne Capital) has provided a GBP103 million senior loan to finance the acquisition and development of a residential led mixed-use scheme in Vauxhall, London.

The 279,900 square feet site – named ‘Graphite Square’ – is located within the Vauxhall, Nine Elms & Battersea Opportunity Area and will provide new homes, workspace and amenities for the area. Planning permission has been granted by Lambeth Council for 160 new one to three-bed private homes, 50 of which will be affordable, as well as over 80,000 square feet of workspace and 400 square feet of retail. The affordable housing units have already been sold and the office space has been pre-let on a 12-year lease.

In addition to aiming for a BREEAM rating of Excellent and EPC rating of A, the scheme will include solar PV panels, air source heat pumps, ample cycle storage, green spaces and a children’s play area. Importantly, the affordable homes will have the same access to the scheme’s amenities as the market-rate homes, to create an inclusive community across the development. This requirement is a key tenet of Cheyne Real Estate.

The project is sponsored by highly experienced Australian property developer, Third.i, which has a successful track record in creating large-scale residential, commercial and senior living projects throughout Australia. Graphite Square will be its second major development in London and will meet the highest quality and environmental standards.

The investment comes from the sixth and seventh vintages of Cheyne’s CRECH programme, the firm’s real estate direct lending strategy, which launched in 2011.

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Mixed-use Vauxhall development on track after funding from Cheyne Capital

An alternative investment fund manager has announced it has provided a senior loan of more than £100 million (£103 million) to finance the acquisition and development of a residential-led mixed-used scheme in Vauxhall, south London.

Cheyne Capital’s funding is for the 279,900 sq ft site – named ‘Graphite Square’ – situated within the Vauxhall, Nine Elms & Battersea Opportunity Area, which also includes Battersea Power Station and a range of other new developments.

Graphite Square will provide new homes, workspace and amenities for the area, with planning permission granted by Lambeth Council for 160 new one to three-bed private homes, 50 of which will be affordable, as well as over 80,000 sq ft of workspace and 400 sq ft of retail. The affordable housing units have already been sold and the office space has been pre-let on a 12-year lease.

In line with the recent trend for greater sustainability, the scheme will include solar PV panels, air source heat pumps, ample cycle storage, green spaces and a children’s play area, as well as aiming for a BREEAM rating of Excellent and an EPC rating of A.

Those behind the scheme insist that the affordable homes will have the same access to the scheme’s amenities as the market-rate homes, to ‘create an inclusive community across the development’ – a requirement that is a key tenet for Cheyne.

The project is being sponsored by ‘highly experienced; Australian property developer, Third.i – a firm with a successful track record in creating large-scale residential, commercial and senior living projects throughout Australia. Graphite Square will be its second major development in London and will aim to meet ‘the highest quality and environmental standards’.

“This investment not only underscores Cheyne’s commitment to working with experienced sponsors which have a thoughtful vision to build sustainable developments that will benefit the whole community, but also our continued interest in investing in multi-purpose sites,” Arron Taggart, head of UK real estate at Cheyne Capital,said.

“We’re pleased to be partnering with Third.i on their second London development and look forward to working together to bring high quality and affordable homes, offices and retail space in this desirable location.”

Ron Dadd, global managing director at Third.i, added: “We’ve been looking for exciting opportunities in London for some time, and Graphite Square is the perfect embodiment of our belief in creating better places to live, work and play. We instantly fell in love with the architecture and place making of the project, seeing it having an ageless appeal that will become a legacy project, one we all can be proud of.”

He went on: “It’s a development which we believe can have an incredible effect on the Vauxhall area and the prospects of all its residents, and we are very proud to be working with partners who passionately share our beliefs and desire to make this happen. We all look forward to working closely with Lambeth Council and the local community to bring our plans to fruition.”

The investment comes from the sixth and seventh vintages of Cheyne’s CRECH programme, the firm’s real estate direct lending strategy that was launched in 2011.

[erictheericworld]

Cheyne Capital Real Estate lends GBP103m for mixed-use Vauxhall development

Alternative investment fund manager Cheyne Capital Management (UK) LLP (Cheyne Capital) has provided a GBP103 million senior loan to finance the acquisition and development of a residential led mixed-use scheme in Vauxhall, London.

The 279,900 sq ft site – named ‘Graphite Square’ – is located within the Vauxhall, Nine Elms & Battersea Opportunity Area and will provide new homes, workspace and amenities for the area. Planning permission has been granted by Lambeth Council for 160 new one to three-bed private homes, 50 of which will be affordable, as well as over 80,000 sq ft of workspace and 400 sq. ft. of retail. The affordable housing units have already been sold and the office space has been pre-let on a 12-year lease.

In addition to aiming for a BREEAM rating of Excellent and EPC rating of A, the scheme will include solar PV panels, air source heat pumps, ample cycle storage, green spaces and a children’s play area. Importantly, the affordable homes will have the same access to the scheme’s amenities as the market-rate homes, to create an inclusive community across the development. This requirement is a key tenet of Cheyne Real Estate.

The project is sponsored by highly experienced Australian property developer, Third.i, which has a successful track record in creating large-scale residential, commercial and senior living projects throughout Australia. Graphite Square will be its second major development in London and will meet the highest quality and environmental standards.

Arron Taggart, Head of UK Real Estate at Cheyne Capital, says: “This investment not only underscores Cheyne’s commitment to working with experienced sponsors which have a thoughtful vision to build sustainable developments that will benefit the whole community, but also our continued interest in investing in multi-purpose sites. We’re pleased to be partnering with Third.i on their second London development and look forward to working together to bring high quality and affordable homes, offices and retail space in this desirable location.”

Ron Dadd, Global Managing Director at Third.i, says: “We’ve been looking for exciting opportunities in London for some time, and Graphite Square is the perfect embodiment of our belief in creating better places to live, work and play. We instantly fell in love with the architecture and place making of the project, seeing it having an ageless appeal that will become a legacy project, one we all can be proud of. It’s a development which we believe can have an incredible effect on the Vauxhall area and the prospects of all its residents, and we are very proud to be working with partners who passionately share our beliefs and desire to make this happen. We all look forward to working closely with Lambeth Council and the local community to bring our plans to fruition.”

The investment comes from the sixth and seventh vintages of Cheyne’s CRECH programme, the firm’s real estate direct lending strategy, which launched in 2011.

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SBAI CONTINUES TO FOCUS ON CULTURE AND DIVERSITY IN THE ALTERNATIVES INDUSTRY PUBLISHING ITS PRINCIPLES REPORT

The Standards Board For Alternative Investments published its first Culture and Diversity report - Principles of Culture and Diversity Strategies

LONDON, UNITED KINGDOM, September 28, 2021 /EINPresswire.com/ -- Today the SBAI, a global alliance of alternative investment managers and allocators and custodian of the Alternative Investments Standards, releases the first publication as part of the SBAI Culture and Diversity Initiative - Principles of Culture and Diversity Strategies.

There is general acknowledgement in the alternatives industry that diversity can help to improve industry outcomes but, putting in place an effective strategy to promote diversity can be challenging. SBAI’s report provides five guiding principles which act as a framework for asset managers and allocators to define their own culture and diversity strategies.

In February 2021, the SBAI formed a Global Advisory Committee comprised of senior industry leaders from asset managers and allocators. This Advisory Committee provides guidance on the strategic direction of SBAI’s Culture & Diversity initiatives.

Jane Buchan, Chair of the Global Advisory Committee, SBAI Trustee, and CEO of Martlet Asset Management said “We are thrilled to have a large and committed group of industry leaders helping guide our efforts on culture and diversity. As asset managers and allocators we must work collaboratively to solve for better and SBAI provides a great platform to do this.“

SBAI’s Culture & Diversity initiative’s primary objective is to provide practical tools to help improve culture and diversity in the alternatives industry. They will produce further guidance reports, including a focus on smaller firms and manager selection for allocators, and host discussion forums and informational events on the topic. On Monday, SBAI hosted a Culture & Diversity event to launch this report led by Jase Auby (CIO of the Teacher Retirement System of Texas), Leda Braga (SBAI Trustee and CEO of Systematica), Luke Ellis (SBAI Deputy Chair and CEO of Man Group), and Phillip Meyer (COO, GC and CCO of Oasis Management Company) – all members of the Global Advisory Committee. The event focused on Moving Beyond the Why for Culture and Diversity in the Alternatives Industry.

Mario Therrien, SBAI Chair and Head of External Investment Funds and External Management at CDPQ said “Through our collaborative platform of asset managers and allocators representing over $5 trillion of assets in our industry, at the SBAI we have an important role to help drive responsible practice, partnership, and knowledge including on culture and diversity. Ultimately, we seek to improve industry outcomes. I am excited to see this report published and look forward to further publications this year”

Maria Long Research and Content Director of the SBAI said “Our mission is to solve for better and culture and diversity is an important part of this. Through collaboration with our asset manager and allocator community in both our culture and diversity working group and the Global Advisory Committee, we have focused on moving past why this is important and on to providing practical guidance on how to improve diversity.”

For more information on the SBAI Culture & Diversity Initiative and how to get involved please contact us at info@sbai.org.

About the Standards Board for Alternative Investments (SBAI)

At the SBAI we are an active alliance of managers and investors dedicated to advancing responsible practices, partnership, and knowledge in the alternatives industry. At our core is a community that is committed to knowledge sharing, informed dialogue, and innovation. We set clear standards and actively promote responsible practice to normalise quality and fairness. Together, our community of allocators and managers create real world solutions – in short, we solve for better.

Our SBAI Alternative Investment Standards are supported by more than 140 alternative investment managers with over $1 trillion in alternative assets under management and by more than 90 major institutional investors, overseeing $4 trillion in assets. More information about our work can be found at www.sbai.org or reach out to us at info@sbai.org

Notes to Editors:

1. SBAI Culture and Diversity Global Advisory Committee

• Jane Buchan, SBAI Trustee; CEO, Martlet Asset Management (Global Chair)

• Luke Ellis, SBAI Deputy Chair; CEO, Man Group plc (Global Deputy Chair)

• Susan Lee, Partner and Hedge Fund and Private Credit Research Analyst, Albourne Partners (Global Deputy Chair)

• Jase Auby, CIO, Teacher Retirement System of Texas

• Edel Bashir, Senior Investment Manager, Aberdeen Standard Investments

• Elena Manola-Bonthond, SBAI EMEA Committee Chair; CIO, CERN Pension Fund

• Leda Braga, SBAI Trustee; CEO, Systematica Investments

• Julie Chang, Managing Director, The Blackstone Group (HK) Limited

• John Claisse, SBAI Trustee; CEO, Albourne America LLC

• Robin Diamonte, CIO, Raytheon Technologies

• Erich Gerth, CEO, BlueBay Asset Management

• Chris Gradel, SBAI Trustee; Co-Founder, PAG

• Theresa Han, Managing Director, Absolute Return Strategies, GCM Investment Hong Kong

• Phillip Meyer, GC, CCO, Co-COO, Oasis Management Company Ltd

• Manny Roman, CEO, PIMCO

• Michael Teo, COO, Avanda Investment Management

2. The Trustees of SBAI are:

• Mario Therrien, Head of Investment Funds and External Management, Caisse de dépôt et placement du Québec (Chair)

• Luke Ellis, CEO, Man Group plc (Deputy Chair)

• Leda Braga, CEO, Systematica Investments

• Jane Buchan, Founder, Martlet Asset Management

• Clint Carlson, President & CIO, Carlson Capital

• John Claisse, CEO, Albourne Group

• Stuart Fiertz, Co-Founder & President, Cheyne Capital Management

• David George, Deputy Chief Investment Officer, Public Markets, Future Fund Australia

• Chris Gradel, Founder, PAG

• Richard Lightburn, CEO, MKP Capital Management

• Daniel Stern, Co-Founder and Co-CEO, Reservoir Capital Group

• Betty Tay, Managing Director, Head of External Managers Department, GIC

• Paula Volent, Vice President and Chief Investment Officer of The Rockefeller University

• Dale West, Senior Managing Director, Teacher Retirement System of Texas

• Poul Winslow, Senior Managing Director, Global Head of Capital Markets and Factor Investing, CPP Investments

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El hedge fund Melqart irrumpe en modo alcista en Solarpack en medio de su OPA

El fondo, que canaliza sus operaciones a través de su Master Fund con sede en Islas Caimán, ha declarado una posición superior al 1% en la compañía fotovoltaica.

Uno de los fondos bajistas más temidos en el Ibex 35 vuelve a ser protagonista para una cotizada española, aunque esta vez en modo alcista. El 'hedge fund' Melqart ha irrumpido en el capital de la compañía fotovoltaica Solarpack adquiriendo algo más del 1% de su capital. La compra de esa participación se produce en medio de la ejecución de la OPA (oferta pública de adquisición) a Solarpack por parte del fondo sueco EQT, que disparó su cotización.

Según consta en los registros de CNMV, la gestora de fondos Melqart Asset Management, a través de ‘hedge fund’ Melqart Opportunities Master Fund, ha declarado el 1,054% del capital de la compañía dedicada a proyectos solares fotovoltaicos. En total, cerca de 350.000 títulos. El movimiento lo ha realizado a través de contratos por diferencias (CFDs), un derivado financiero que le permite tomar una posición sin tener las acciones y que puede liquidarse, o no, con la entrega del equivalente a esa posición en títulos. La operación se realizó este lunes día 20 y, al precio de mercado de este martes, la participación vale 9,16 millones de euros.

Esta adquisición es relevante ante la tradición de bajista de Melqart Asset Management. De hecho, su posiciones cortas han sido destacadas en los peores momentos de compañías como los supermercados Dia, la constructora OHL, la ingeniería Abengoa o Banco Popular. Las cuatro registraron algunas de las mayores caídas en la bolsa española. No obstante, en algunas de ellas tomaron posiciones, como paso previo para construir un corto. Además, recientemente construyó una participación similar -con derivados- en el grupo de medios Prisa.

Melqart Asset Management tiene su sede en Londres, aunque el fondo que ostenta la partipación en Solarpack está radicado en Islas Caimán, y está especializado en la gestión de inversiones alternativas. Fue fundada en 2015 por su alctual CEO, Michel Massoud, que antes trabajó en Morgan Stanley o Cheyne Capital.

Su irrupción en la fotovoltaica española coincide con el proceso de adquisición de Solarpack por parte de EQT. El fondo sueco, que entre otras compañías controla también la española Idealista, lanzó en junio una OPA sobre el 100% del capital de la firma de renovables. Ofrece 26,5 euros por título a través de su vehículo Veleta BidCo. El anuncio disparó un 43% el valor de los títulos de Solarpack, hasta alcanzar el precio de la oferta. Desde entonces, apenas registra movimientos en bolsa.

La CNMV y la CNMC ya han dado el visto bueno de la OPA, valorada en 881 millones de euros. Ahora, el consejo de administración de Solarpack prepara un comité de seguimiento de la oferta integrado por los consejeros que no se encuentran en situación de conflicto de interés. Estará integrado por Ignacio Artázcoz Barrena -que actúa como presidente-, Gina Domanig, Rafael Canales Abaitua, Begoña Beltrán de Heredia Villa y Luis Barallat Sendagorta. Además, Solarpack ha contratado los servicios de JP Morgan AG como asesor financiero y de Uría Menéndez Abogados como asesor legal en relación con la OPA "para el mejor desempeño de sus funciones".

La familia Galíndez mantiene el control hasta la OPA

Por ahora, la participación de Melqart en Solarpack es mínima. Hasta que se haga efectiva la OPA, la familia Galíndez, fundadora de la compañía, mantiene su control con un porcentaje que roza el 51%. En concreto, ostentan esa posición a través de las sociedades Beraunberri (40,1%), Burgest 2007 (7,94%) y Landa (con un 2,92%). No obstante, todos ellos se comprometieron a acudir a la OPA con la condición de que Pablo Burgos Galíndez se mantendrá en su puesto actual como consejero delegado.

Otro de los accionistas significativos que tendrá que responder a la oferta es Carmen Ybarra Careaga, que posee más del 5% del capital a través del vehículo inversor de la familia, Onchena SL. Álvaro Ybarra, presidente ejecutivo de la sociedad que gestiona el patrimonio de la familia, valoró como "atractiva" la oferta de EQT sobre Solarpack tras conocerla.

Pero, además, en el accionariado de Solarpack -que salió a bolsa en diciembre de 2018- se han producido movimientos de fondos desde que EQT lanzara la OPA, al que ahora se suma Melqart. El más destacado es la presencia de Morgan Stanley, que irrumpió con más del 5% la semana pasada, convirtiéndose en el tercer máximo accionista.

Antes, un día después del anuncio de EQT, entraron por primera vez en el capital de Solarpack el fondo soberano noruego y Oddo BHF Merger Arbitrage, que actualmente ostentan el 2% y el 3,16%, respectivamente. La gestora de Banco Santander, que llegó a controlar el 8% en el mes de julio, ahora posee cerca del 3,15%.

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AlbaCore Capital Group makes three senior hires

European credit specialist AlbaCore Capital Group (AlbaCore) has made three senior hires to reinforce its Operations, Business Development and Investor Relations teams.

As part of the growth of the AlbaCore platform, investing across the European credit spectrum with USD8.5bn AUM, AlbaCore has bolstered its senior executive group. Jenny Fung is appointed as Managing Director of Investor Relations in New York to further expand global investor relationships and our commitment to the region. Tara Mulholland joins as Head of Business Transformation and Micaela Kelley as Deputy Chief Operating Officer to support Matthew Courey, Chief Operating Officer and Founding Partner.

Fung brings a wealth of financial services experience with 25 years in the industry. She joins from Taconic Capital, a global investment firm, where she was Director of Marketing and Investor Relations for 13 years, and prior to that at Bank of America, AIG and CSFB.

Mulholland will oversee an operational change programme across the firm, joining with 19 years’ experience from Cheyne Capital where she was a Partner and served as Head of Business Transformation, Chief Administrative Officer and Head of Operations.

Kelley joins with over 11 years of experience as a Chief Operating Officer with alternative funds. She joins from JNE Partners where she served as Partner and Chief Operating Officer following the spin-out from MSD Partners, and previously as Partner and Chief Operating Officer of Observatory Capital Management. Micaela has 17 years prior experience in prime brokerage and credit risk management at Goldman Sachs and Morgan Stanley.

Matthew Courey, Founding Partner and Chief Operating Officer at AlbaCore Capital Group, says: “We are excited to have Jenny, Tara and Micaela join the AlbaCore team. Their unique backgrounds and depth of experience will continue to drive our business and position our team optimally for the many opportunities ahead.”

David Allen, Managing Partner and Chief Investment Officer at AlbaCore Capital Group, adds: “I am delighted that such high calibre executives have chosen to join the firm. We are proud of the talented team we have built at AlbaCore with 20 nationalities and a diverse set of backgrounds and experiences. Tara, Micaela and Jenny will further strengthen our ability to deliver for our investors across the credit spectrum”.

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Cheyne Capital: Making an impact in real estate

Professional Pensions spoke to Cheyne Capital co-founder, president & head of responsible investment Stuart Fiertz as part of an exclusive series of interviews with some of the finalists of the UK Pensions Awards 2021. This is what he had to say…

What have been your main achievements as an organisation over the past 18 months?

In 2020 we launched our second impact real estate fund which builds or buys property for use as affordable or specialist housing, demonstrating that private capital can work with the public sector to help tackle the chronic shortage of such housing in the UK. The fund launched with Local Government Pension Scheme investment and has already committed £36m to homes for adults with a learning disability, £34m to a development in central Manchester with 35% of homes allocated to keyworkers at discounted rents, and £38m to building three state-of-the-art care homes with 35% of beds allocated to publicly funded residents.

In the case of the Manchester and care home developments, we are particularly proud to be delivering accommodation at discounts to market rents in schemes where there was no planning requirement to deliver any affordable housing at all. Further, we have introduced indexation limits on all rents to ensure the long term affordability of the accommodation.

Across the wider firm, we continued to provide other funding solutions for real estate and corporates, launching the sixth and seventh vintages of CRECH, our £2.2bn European real estate lending programme, and we closed our second €1bn (£850m) strategic value credit fund which focuses on providing constructive capital solutions to financially constrained mid-market businesses.

What do you believe sets you apart from your peers and contributes to your successes?

In impact real estate, we launched the UK's first affordable housing fund in 2014 so we have had the chance to establish a track record and build up a large pipeline of investments to which future capital can be quickly committed. In addition, we are one of the few managers with in-house development capabilities, which means that development gains go to the benefit of our investors rather than being paid away to external developers. We favour diversification across location, tenant and counterparty type to reduce risk for investors and to aid the rapid deployment of capital for impactful purposes; we are evangelical about our schemes being ‘tenure blind' so there is absolutely no difference between the homes for market-rate rent and those at discounted rents; and we focus on additionality (creation of stock) rather than buying existing stock which would always have been made available for use as affordable housing anyway. Our experience of having operated in this space for seven years means that investors benefit from the lessons we have learned and we are always happy to share details of our experiences, for example why we have chosen to launch our second fund as an evergreen fund rather than a closed-ended fund, with anyone who is interested in this sector.

How has your business dealt with the challenges of Covid-19?

As an asset class, affordable housing has not been negatively impacted by Covid-19. Rather Covid-19 has exacerbated the chronic housing issues in the UK and heightened the need for institutional capital to help plug the funding gap. Indeed, some estimates suggest that councils' waiting lists will increase to two million people as a result of the pandemic. While we did experience some delays in construction timetables in the short period when construction workers were not able to get on site, these were temporary. For existing and completed schemes, rental income was not affected.

What are the key challenges facing your pension scheme clients at the current time and how are you helping them address these issues?

With various traditional sources of yield having become less attractive (UK 10-year Gilts, for example, are currently offer a negative yield), pension schemes need to look elsewhere for long-term, stable, inflation-linked income to match their liabilities. Our experience shows that the distributable yield on a diversified portfolio of affordable housing, supported living and social care assets can be approximately 5% (net of fees) and is inflation-linked. With supply/demand dynamics suggesting a 20+ year backlog in UK affordable housing and the stability of the rental receipts, we believe this asset class is a perfect match for UK pension schemes in the current environment. And on top of the financial investment case, investment in this sector also makes a "real impact on individual lives"

How will you continue to improve your services to pension scheme clients over the coming year?

We hope to continue meeting the needs of our pension scheme clients by providing cost effective funds that demonstrate a visible and stable running income and attractive internal rates of return. We know that rapid deployment of capital is important to our clients and we plan to continue to deliver this through our substantial investment in our origination platform along with fundraises which are purposefully limited in size so that capital can be put to work quickly. Finally, we will continue to strive for best-in-class ESG credentials both directly, such as in our affordable housing schemes, and in other areas for example, incorporating ESG-linked covenants and pricing incentives into agreements when we act as a lender.

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Asset management roundup: Cheyne Strategic Value Credit raises €1bn

Cheyne Strategic Value Credit has raised €1bn for its Cheyne European Strategic Value Credit Fund II (SVC II), reaching its capacity less than six months following its first close.

Funding came from existing investors and significant excess demand from new investors, it added.

Cheyne said the investment fund “enjoyed broad investor representation and strong institutional support, with approximately 80% represented by pension and insurance companies predominantly in Europe and North America.”

According to the Texas County & District Retirement System’s website, the US pension fund committed $22.5m to the fund this summer – an additional investment to the $150m invested last December.

The firm – established in 2017 as a new investment division within alternative asset manager Cheyne Capital – launched its inaugural European Strategic Value Credit Fund which was substantially oversubscribed and closed at its hard capacity limit of €1bn in June 2019.

SVC II continues the same investment strategy as its predecessor fund, providing constructive capital solutions to mid-market corporates facing liquidity and other complex financial challenges, working on a consensual basis with management teams and shareholders to provide a positive turnaround, it said.

The new fund has already initiated seven investments, in five different European countries and across a range of industries including business process outsourcing, ground & cargo handling services, security solutions and food products.

Managers partner to accelerate development of Iceberg Data Lab

AXA Investment Managers, Natixis Investment Managers and its affiliate Mirova, Sienna Investment Managers and Solactive have entered into an agreement with Iceberg Data Lab to participate in its series A fund raise.

Following this minority investment, each investor will also be represented on Iceberg Data Lab’s supervisory board in order to support the development of the company.

With increased demand from both financial institutions and their stakeholders for better transparency on the impact of portfolios on climate and the environment, the partner firms plan to support Iceberg Data Lab’s global expansion and product development which includes data coverage enlargement, automated machine learning and autonomous AI.

Iceberg Data Lab is a fintech company leveraging data treatment tools and science-based models allowing financial institutions to assess the impact of their portfolios on the environment.

The company has developed methodologies to calculate the various environmental impacts of issuers and assets throughout their value chain (supply chain to end use).

[erictheericworld]

Notizie da Cinven, Crayhill Capital, Thoma Bravo, Revaia, Sycomore, Gaia Capital, Cheyne Capital

Cinven ha annunciato l’acquisizione della piattaforma di gestione patrimoniale True Potential (si veda qui il comunicato stampa). L’operazione potrebbe valutare l’asset manager tra 1,6 e 2 miliardi di sterline (si veda qui Sky News), una cifra che però �� al di sotto dei 2,5 miliardi che si dice i soci di True Potential volessero spuntare quando erano in trattative con altri potenziali investitori, ivi compresa una Spac promossa da Bernard Arnault. True Potential iprevede di chiudere il 2021 con oltre 20 miliardi di sterline di asset in gestione e di generare un ebitda di circa 135 milioni. Fondata nel 2007, True Potential è controllata da David Harrison (presidente), Daniel Harrison (ceo), Neil Johnson (cfo), Mark Henderson (head of True Potential investments) ed Earl Glasgow (head of distribution).

Crayhill Capital Management ha raggiunto il closing finale della raccolta del suo fondo Crayhill Principal Strategies Fund II all’ hard cap di 820 milioni di dollari (si veda qui il comunicato stampa). L’azienda, che è stata lanciata nel 2015 da Joshua Eaton eCarlos Mendez, una coppia di veterani di Magnetar Capital, si concentra su investimenti in credito e in particolare in special situation, leasing di attrezzature, factoring dei trasporti, finanza commerciale, energie rinnovabili e crediti.

Thoma Bravo, ha annunciato che acquisirà il controllo del fornitore di intelligence sulle minacce informatiche Intel 471 dai fondatori Mark Arena e Jason Passwaters, che manterranno una quota di minoranzz significativa e continueranno a guidare la società (si veda qui il comunicato stampa). Thoma Bravo supporterà la società specializzata in cybersecurity nell’evoluzione della sua suite di prodotti. Il presidente di Thoma Bravo, Adam Solomon, ha dichiarato: “Mentre la trasformazione digitale continua ad accelerare, le organizzazioni hanno raggiunto un punto di svolta nel modo in cui affrontano la sicurezza informatica, riconoscendo l’importanza fondamentale di farsi trovare preparati di fronte alle minacce”. Sempre nello stesso settore a fine agosto Thoma Bravo ha concluso l’acquisizione di Proofpoint (si veda qui il comunicato stampa), a seguito di un’opa annunciata lo scorso aprile (si veda altro articolo di BeBeez) per un valore di 12,3 miliardi di dollari.

Revaia (ex Gaia Capital) ha chiuso la raccolta del suo primo fondo di crescita a quota 250 milioni di euro, ben oltre il target iniziale di 200 milioni, classificandosi così come il più grande fondo europeo di venture capital a guida femminile (si veda qui il comunicato stampa). Tra gli investitori si contano i colossi assicurativi Generali, Allianz e Maif, fondi pensione e altri investitori istituzionali tra i quali Bpifrance e family office. Fondato da Alice Albizzati ed Elina Berrebi, Revaia è supportata da Sycomore Asset Management, che oltre ad avere una quota di minoraza nell’asset management company, è anche investitore del fondo. Revaia ha 15 dipendenti e ha aperto un ufficio a Berlino all’inizio di quest’anno. Revaia ha iniziato a raccogliere il fondo nel 2019 e ora ha 10 società in portafoglio in Europa, inclusa la società di software per call center Aircall, che a giugno è stata valutata oltre un miliardo di dollari.

Cheyne Capital ha raggiunto l’hard cap di un miliardo di euro nella raccolta del suo secondo fondo di credito, special situation e ristrutturazioni del debito, Cheyne European Strategic Value Credit Fund II (si veda qui il comunicato stampa). Il primo fondo della serie aveva a sua volta chiuso la raccolta nel 2019 a quota un miliardo di euro (si veda qui il comunicato stampa di allora). Il Fondo II, che continuerà la strategia di fornire soluzioni di capitale alle società di medie dimensioni che affrontano problemi di liquidità e altre complesse sfide finanziarie. Il nuovo fondo ha già condotto sette investimenti in cinque diversi paesi europei, Italia compresa. Il fondo lo scorso anno ha infatti investito in bond e strumenti partecipativi di General Smontaggi, tra i leader nazionali nel settore delle demolizioni e bonifiche (si veda altro articolo di BeBeez) e in Irplast, società attiva nel settore del packaging (si veda altro articolo di BeBeez). Anthony Robertson, managing partner e cio di Cheyne Strategic Value Credit, ha dichiarato: “Siamo onorati che così tanti dei nostri investitori esistenti abbiano scelto di continuare il viaggio con noi e accogliamo calorosamente i nostri nuovi investitori. C’è un enorme bisogno di fonti alternative di capitale per supportare le imprese europee del mercato medio che affrontano sfide finanziarie, in particolare quelle che sono state colpite negativamente dalla pandemia”.

[erictheericworld]

Cheyne Capital closes European credit fund at $1.2 billion

Cheyne Capital Management closed its latest European fund, Cheyne European Strategic Value Credit Fund II, at its €1 billion ($1.2 billion) target, a spokeswoman confirmed.

The fund has a value-oriented, opportunistic focus on special situations and debt restructuring. It is also focused on providing capital to midmarket companies facing liquidity issues across sectors such as business process outsourcing, ground and cargo handling services, security solutions and food production. The fund applies ESG and engagement framework to its investments.

Among investors in the fund is the $40.7 billion Texas County & District Retirement System, Austin, which committed an additional $23 million in July from the fund's $1.1 billion distressed debt portfolio. The system initially committed $150 million to the fund in December 2020.

Predecessor fund Cheyne European Strategic Value Credit Fund I also closed at €1 billion in June 2019.

[erictheericworld]

Cheyne Strategic Value Credit completes EUR1bn fundraise

Cheyne Strategic Value Credit has successfully raised its second fund, Cheyne European Strategic Value Credit Fund II (SVC II) securing EUR 1 billion capacity less than six months after its first close, with strong support from existing investors and significant excess demand from new investors.

Cheyne Strategic Value Credit was established in 2017 as a new investment division within alternative asset manager Cheyne Capital and employs a value-oriented, opportunistic approach to investing in corporate credit, with a focus on special situations and debt restructurings. The group’s inaugural European Strategic Value Credit Fund (SVC I) was substantially oversubscribed and closed at its hard capacity limit of EUR1 billion in June 2019.

SVC II continues the same investment strategy as its predecessor fund, providing constructive capital solutions to mid-market corporates facing liquidity and other complex financial challenges, working on a consensual basis with management teams and shareholders to effect a positive turnaround. The new fund has already initiated seven investments, in five different European countries and across a range of industries including business process outsourcing, ground & cargo handling services, security solutions and food products.

As part of its aim to promote higher ESG standards within private credit, the team has adopted an enhanced ESG framework for new investments with an increased emphasis on positive engagement. The group is seeking to influence ESG strategy and outcomes more meaningfully at the corporate borrower level and is actively incorporating ESG-linked covenants in new facility agreements. This includes, for example, pricing incentives when pre-defined ESG targets have been met and adhered to.

Key sources of opportunity for the fund include the ongoing sell-down of underperforming and other non-core corporate loans by European banks, and the provision of rescue and liquidity bridge financings to stressed but fundamentally viable businesses. The fund has been deliberately capacity-constrained to maximise its participation in the broadest range of opportunities and capital structures, with a focus on smaller transaction sizes which fall below the minimum size requirements of the larger distressed debt and opportunistic credit funds.

Anthony Robertson, Managing Partner & CIO of Cheyne Strategic Value Credit, says: “We are honoured that so many of our existing investors have chosen to continue the journey with us, and we warmly welcome our new investors. There is a huge need for alternative sources of capital to support European mid-market businesses facing financial challenges, particularly those which have been negatively impacted by the pandemic. Our team has a recognised track record in providing flexible capital solutions to facilitate a normalisation and recovery in operating performance.”

[erictheericworld]

Axios Pro Rata

Top of the Morning

We've written before that much of U.S. antitrust law is antiquated, having been written over a century ago to regulate railroads.

What we've not really mentioned, however, is that railroad-specific rules were updated much more recently, and are complicating one of the largest announced mergers of 2021.

Background: Kansas City Southern in March agreed to be bought for US$25 billion by Canadian Pacific, in order to create the first freight railroad network to connect the U.S., Canada, and Mexico.

Two months later, KCS walked away in favor of a $33.6 billion offer from Canadian National Railway, and paid a $700 million termination fee.

The larger deal included plans to use a voting trust, which would buy and operate Kansas City Southern while the deal is under regulatory review.

But the voting trust was subject to approval by the Surface Transportation Board, which in 2001 established new rules that would make it tougher for railroads to combine — requiring them to prove such mergers would enhance competition.

STB initially denied Canadian National's voting trust request, but said it would reconsider after KCS accepted the offer.

Fast forward to last week and STB held firm, unanimously rejecting the voting trust request.

Canadian National also is taking fire from inside the locomotive, as 5% stakeholder TCI Fund Management is agitating for board control and the removal of Canadian National's CEO and chairman for "incompetent" and "weak" management.

Were it to succeed in its proxy fight, indirectly aided by U.S. regulators, TCI has pledged to stop pursuing the Kansas City Southern deal.

What now: Canadian Pacific, which was given a waiver to the 2001 rules, lay in wait for most of the time Canadian National was sweating out the STB decision. But last month it upped its bid to $31 billion, and KCS on Saturday said the two sides have restarted talks, acknowledging that the lower-priced deal might be the better deal.

Not so fast: It might not be quite as simple as KCS picking Canadian Pacific. That's because TCI, the activist hedge fund pressuring Canadian National, happens to be the largest outside shareholder in Canadian Pacific — with more than a 8% stake — which could create a different set of legal challenges, given the arguable conflicts of interest.

The bottom line: The route from Canada to Mexico still runs through Kansas City, but there is no longer an estimated time of arrival.

The BFD

PayPal (Nasdaq: PYPL) agreed to acquire Paidy, a Japanese installment payments enabler, for around $2.7 billion.

Why it's the BFD: This sets up a global consolidation spree in the "buy-now, pay-later space," following Square's agreement last month to buy Afterpay for $29 billion.

Bonus: Addi, a Bogota-based "buy-now, pay-later" startup, today announced $75 million in new Series B funding led by Greycroft.

ROI: Paidy has raised $585 million from firms like PayPal Ventures, Arbor Ventures, Visa Ventures, Unusual Ventures, SBI Holdings, Eight Roads, Goldman Sachs, Itochu Corp., JS Capital Management, Tybourne Capital Management, Soros Fund Management and Wellington Management.

The bottom line: "Japan is the third largest e-commerce market in the world, and so this is a significant move by PayPal to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards." — Kate Park, TechCrunch

Venture Capital Deals

• Cao Cao Mobility, the ride-hail unit of Chinese automaker Geely, raised around $589 million in Series B funding led by state-backed Suzhou Xiangcheng Financial Holding Group. http://axios.link/4YAa

• Aviatrix Systems, a Santa Clara, Calif.-based multicloud network platform, raised $200 million at a $2 billion valuation. TCV led, and was joined by Insight Partners and Tiger Global. http://axios.link/FNTo

• Spiber, a Japanese developer of plant-based protein polymers, raised $91 million at a $1.2 billion valuation from The Carlyle Group, Fidelity and Baillie Gifford. http://axios.link/shl8

• Marshmallow, a London-based car insurer, raised $85 million in Series B funding at a $1.25 billion valuation from backers like Passion Capital, Investec and SCOR. http://axios.link/Wuxb

Emulate, a Boston-based developer of "organ-on-a-chip" products, raised $82 million in Series E funding co-led by Perceptive Advisors and insider Northpond Ventures. http://axios.link/1a6Y

• SingleStore, a San Francisco-based real-time database platform, raised $80 million in Series F funding at a $940 million valuation. Insight Partners led, and was joined by Khosla Ventures, Dell Capital, Rev IV, Glynn Capital and GV. http://axios.link/sdCR

Owlstone Medical, a British breath biopsy startup, raised $58 million in Series D funding led by Horizons Ventures. http://axios.link/yzVP

• Leap, an Indian study abroad platform, raised $55 million in Series C funding. Owl Ventures led, and was joined by Harvard Management Co., Sequoia Capital India and Jungle Ventures. http://axios.link/pkg9

• UnitQ, a Burlingame, Calif.-based product quality monitoring platform, raised $30 million in Series B funding. Accel led, and was joined by Creandum and Gradient Ventures. www.unitq.com

PetMedix, a British animal medicines startup, raised £27 million in Series B funding from Tencent, Kyoritsu Holdings, Digitalis Ventures, Parkwalk Advisors and Cambridge Innovation Capital. www.petmedix.co.uk

• Jetty, a New York-based renter payment platform, raised $23 million. Citi and Flourish Ventures co-led, and were joined by Credit Ease and K5. Previous backers include Farmers Insurance Group, Khosla Ventures and Ribbit Capital. http://axios.link/Hpqt

• Rainforest, a Singapore-based e-commerce aggregator, raised $20 million in seed funding. Monk's Hill Ventures led, and was joined by January Capital, Crossbeam Venture Partners, Amasia and Lo & Behold Group and insiders Nordstar and Insignia Venture Partners. http://axios.link/oqKC

• Borneo, a real-time data security and privacy observability platform, raised $15.5 million in Series A funding. Vulcan Ventures led, and was joined by Prosus Ventures, Lytical Ventures and Wavemaker Partners. www.borneo.io

• Vowel, a New York-based virtual meeting platform, raised $13.5 million in Series A funding. Lobby Capital led, and was joined by insiders Amity Ventures and Box Group. http://axios.link/WSXe

• Novi, a San Francisco-based B2B marketplace for helping brands make more sustainable products, raised $10.3 million in Series A funding. Greylock led, and was joined by Defy Partners, Thomas Layton and Yannis Skoufalos. http://axios.link/Wong

Orbit Fab, a San Francisco-based orbital refueling startup, raised $10 million. Asymmetry Ventures led, and was joined by Northrop Grumman, Lockheed Martin Ventures, Ventures, Audacious Venture Partners and insider SpaceFund. http://axios.link/CDpE

• Accure, a German provider of battery safety software, raised $8 million in Series A funding. Blue Bear Capital led, and was joined by Capnamic Ventures and 42CAP. www.accure.net

• HoneyBee, a financial wellness as-a-benefit startup, raised $5.7 million. FFVC led, and was joined by Resolute Ventures, Afore Capital, Rebalance Capital, K50, Financial Venture Studio and Baron Davis. http://axios.link/OTwr

Private Equity Deals

• Apollo Global Management agreed to buy up to a 50% stake in MaxCap, an Australasian commercial real estate financier and fund manager. http://axios.link/oflw

• The Blackstone Group agreed to buy The Chamberlain Group, an Oak Brook, Ill.-based provider of smart access solutions, from The Duchossois Group at a $5 billion valuation. http://axios.link/IkIh

Bradford Health Services, a Birmingham, Ala.-based portfolio company of Centre Partners, acquired Cornerstone of Recovery, a Louisville, Tenn.-based substance use disorder treatment provider. www.bradfordhealth.com

• Morrisons (LSE: MRW), the British grocery chain, is planning a formal auction to decide on if it will be acquired by Clayton Dubilier & Rice or by Fortress Investment Group. The ultimate deal is expected to be worth around $10 billion. http://axios.link/Qppo

Neptune Energy, a London-based oil and gas exploration company backed by The Carlyle Group and CVC Capital Partners, is considering a merger with Harbour Energy (LSE: HBR), per Bloomberg. http://axios.link/lDf5

• Sherpa Capital acquired Forenqui, a Spanish maker of hygiene and personal care products.http://axios.link/fuCg

Smiths Group (LSE: SMIN) agreed to sell its medical equipment group to ICU Medical (Nasdaq: ICUI) for $2.4 billion, walking away from an earlier $2 billion agreement with TA Associates. http://axios.link/mpVH

Public Offerings

Definitive Healthcare, a Framingham, Mass.-based health care commercial intelligence software provider, set IPO terms to 15.6 million shares at $21-$24. It would have a $3.3 billion market cap, were it to price in the middle, plans to list on the Nasdaq (DH) and reports a $26 million net loss on $77 million in revenue for the first half of 2021. Backers include Advent International and Spectrum Equity. http://axios.link/n0vb

• First Watch Restaurant Group, a Bradenton, Fla.-based breakfast and lunch restaurant chain with over 420 U.S. locations, filed for an IPO. It reports nearly $2 million of net income on $281 million in revenue for the first half of 2021. Backers include Advent International. http://axios.link/Jajx

Procept BioRobotics, a Redwood City, Calif.-based developer of robotic systems for minimally invasive urologic surgery, set IPO terms to 5.5 million shares at $22-$24. It would have a $1.1 billion fully diluted value, were it to price in the middle, and raised over $400 million from firms like CPMG, Viking Global Investors and Fidelity. http://axios.link/1y7c

• TDCX, a Singapore-based provider of customer experience solutions to tech companies, filed for a $400 million IPO. It plans to list on the NYSE (TDCX), and reports $33 million of profit on $187 million in revenue for the first half of 2021. http://axios.link/ebdV

SPAC Stuff

• AEI CapForce II Investment, an Asia fintech SPAC led by John Tan (AEI Capital Group), filed for a $100 million IPO. http://axios.link/mJ7B

Monterey Bio Acquisition, a biotech SPAC led by Sanjeev Satyal (ex-CEO of pH Pharma), filed for a $100 million IPO. http://axios.link/Ev2u

Liquidity Events

• Advent International agreed to sell Distribution International Inc., a Houston-based mechanical insulation distributor, to TopBuild (NYSE: BLD) for $1 billion in cash. www.distributioninternational.com

• Altisource Portfolio Solutions (Nasdaq: ASPS), a Luxembourg-based mortgage services company, hired Guggenheim Partners to advise on a possible sale of its origination business (dba Lenders One), per Bloomberg. http://axios.link/Leep

Astorg and Goldman Sachs agreed to sell Héra, a Paris-based maker of OTC products for women’s health and scar and blister care, to Perrigo Co. (NYSE: PRGO) for €1.8 billion in cash. www.hra-pharma.com

• Shutterstock (NYSE: SSTK) bought PicMonkey, a Seattle-based online graphic design and image editing platform, for $110 million in cash from sellers like Spectrum Equity. www.picmonkey.com

More M&A

• Elliott Management has amassed more than a $1 billion stake in Citrix Systems (Nasdaq: CTXS), representing more than 10% ownership, per WSJ. http://axios.link/uSDD

• Enthusiast Gaming (Nasdaq: EGLX) acquired Addicting Games, a Los Angeles-based casual gaming company, for $35 million. http://axios.link/CjU1

• First Abu Dhabi Bank hired Morgan Stanley to find a buyer for its Magnati payments business, which could fetch around $1 billion, per Bloomberg. http://axios.link/lEMF

• Globe Telecom, the Philippines' largest telco by market cap, is considering a sale of its data centers, which could fetch around $200 million, per Bloomberg. http://axios.link/pTy4

• JPMorgan (NYSE: JPM) agreed to buy a majority stake in Volkswagen's payments business. http://axios.link/h4Y4

Mars agreed to buy Los Angeles-based cat litter maker PrettyLitter for more than $500 million, per Bloomberg. Sellers include BAM Ventures and Draper Associates. http://axios.link/PtqH

• MTN Group, Africa's largest mobile operator, is in talks to sell its Afghani business, per Bloomberg. http://axios.link/ABNB

Sanofi (Paris: SAN) agreed to buy New York-based biotech Kadmon (Nasdaq: KDMN) for $1.9 billion in cash, or $.950 per share (79% premium to yesterday’s closing price). http://axios.link/e5bY

TransUnion (NYSE: TRU), a credit reporting agency, is seeking a buyer for its healthcare revenue-cycle management unit, which generates around $100 million in EBITDA, per PE Hub. http://axios.link/DkPG

• Vertiv (NYSE: VRT) agreed to buy E&I, an Ireland-based provider of electrical switchgear and power distribution systems, for around $1.8 billion in cash and stock (plus up to $200m in earnouts). www.vertiv.com

Fundraising

• Alpine Investors, a San Francisco-based private equity firm, raised $2.25 billion for its eighth fund. www.alpineinvestors.com

• Cheyne Capital of London raised €1 billion for its second corporate credit fund, which focuses on special situations and debt restructurings. www.cheynecapital.com

• H.I.G. Capital raised €2 billion for a European middle-market LBO fund. http://axios.link/jIOY

• Intudo Ventures, an Indonesian VC firm, raised $115 million for its third fund. http://axios.link/Jz7y

• Trill Impact, a new impact PE firm focused on Northern Europe, raised €900 million for its debut fund. http://axios.link/ffSr

• Volkswagen is forming a €300 million VC fund focused on decarbonization. http://axios.link/iOrx

It's Personnel

• Jenny Fielding is stepping down as a managing director with TechStars, after seven years, per her LinkedIn.

• Jack MacDonald, Gary Kirkham and Steve Miller each left BofA Merrill Lynch to join advisory firm Centerview Partners as Palo Alto-based partners. www.centerviewpartners.com

[erictheericworld]

Real Estate Credit Investments “continued delivery of steady returns” says Hardman & Co (LON:RECI)

Real Estate Credit Investments Ltd (LON:RECI) is the topic of conversation when Hardman & Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.

Q1: Your recent report on Real Estate Credit Investments sits behind a disclaimer. What can you tell us about that?

A1: It is just the standard disclaimer that many investment companies have. In essence, for regulatory reasons, there are some countries (like the US) where the report should not be read. It is not a simple asset class, and the report should only be looked at by professional/qualified investors.

Q2: Your recent report reviewed RECI’s latest quarterly update and factsheet. What can you tell us about it?

A2: The key messages we take from RECI’s July quarterly investor update and end-July 2021 factsheet are i) attractive returns from low LTV (average 65%) credit exposure to UK and European large, well-capitalised and experienced institutional borrowers, ii) stable dividends, at 3p per quarter (latest yield: 7.9%), iii) a highly granular book – 61 positions, with the top position 14% of NAV (by commitment), iv) modest leverage – gross 29%, net 16.0% (with £44.4m cash on the balance sheet), and v) access to a strong pipeline of enhanced return investment opportunities identified by Cheyne.

The premium to NAV (2%) is back in line with pre-pandemic average levels.

Q3: You talk of the resilience in the model. Do you have any facts to support that assertion?

A3: Sure. The most important fact is that there were no defaults in the portfolio. Cheyne completed a successful and favourable completion on the last remaining hotel loan restructuring, showing that other finance providers consider its lending robust too.

There has been a continued migration of the portfolio to senior lending, with nine new deals completed (£117m of commitments) since 31 March 2020, showing strength of opportunity post the initial impact of COVID-19. Senior loans and bonds were equal to 82% of NAV at end-June, with the portfolio concentrated in credits to large, well-capitalised and experienced institutional borrowers.

We also note that the net debt position was halved within the first few months of the pandemic, before being increased steadily from summer 2020, as the risk/return outlook improved. RECI had also said it would manage liquidity, and that its performance through COVID-19 had delivered on this aspect of resilience too.

Q4: And the outlook?

A4: Bank lending remains constrained across Europe, and high barriers to entry secure a continuing compelling investment landscape, especially in senior lending. RECI is well-positioned to address future market uncertainty, with a strong portfolio profile (see above), cash on the balance sheet of £44.4m and modest leverage (1.29x gross, 1.16x net of cash held), as at end-July 2021. Cheyne advises that its real estate business’s current pipeline comprises £0.9bn across 17 deals.

The main constraint on RECI accessing this deal flow, and so achieving economies of scale, was the share price discount to NAV until recently, which prevented the further issuance of equity. Should the shares move to a sustained premium, RECI would be able to access this capital and grow its loan book, and so achieve better performance. RECI’s stable dividend through COVID-19 reflected its confidence in delivering on this outlook.

Q5: And, finally, what can you tell us about Real Estate Credit Investments’ valuation?

A5: Despite what management said, the company’s track record, and the portfolio and management process characteristics which suggested that the portfolio would be resilient, when the market took fright in spring 2020, RECI’s discount ballooned to well over 20%.

Over time, the continued delivery of steady returns – combined with no defaults and management reiterations that it expected full repayment of principal and contractual interest – has restored confidence, and there has been a steady recovery.

The shares are now trading at a modest premium to the accounting NAV, very much in line with the five-year average ahead of the pandemic. In our note, we gave comparisons of RECI with a close and broad peer group. The NAV rating is now the highest in the peer group, but so is the dividend yield, which, as noted earlier, is close to 8%.

RECI continued to pay its 3p quarterly dividend through the pandemic, and it is covered by recurring interest income, leaving any capital gains to feed through to NAV accretion.

[erictheericworld]

Study shows institutional investors are increasingly focusing on cryptocurrencies and digital assets

July 6, 2021 (Investorideas.com Newswire) A new survey (1) of institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who currently have exposure to cryptocurrencies and digital assets, reveals that 82% expect to increase their exposure between now and 2023. Four out of ten say they will dramatically increase their holdings. Only 1% said they would sell their entire holdings, and just 7% said they would reduce their exposure.

However, Nickel Digital Asset Management (Nickel), Europe's leading regulated and award-winning investment manager dedicated to the digital assets market, which conducted the study, says in most cases institutional investors with holdings in Bitcoin and other cryptocurrencies have very low levels of exposure as many have just been testing to market to see how it works.

The main reason given for investing more in digital assets is the long-term capital growth prospects of cryptocurrencies and digital assets - the view cited by 58% of respondents. This is followed by 38% who said it is because having some exposure to cryptoassets means they have become more comfortable and confident in holding the asset class. Some 37% cited more leading corporates and fund managers investing in cryptoassets as a reason as this too is giving them more confidence, and 34% said an improving regulatory environment was also a key factor in wanting to increase their allocation.

Anatoly Crachilov, co-Founder and CEO of Nickel Digital, commented:

"The number of institutional investors and corporates holding Bitcoin and other cryptoassets is growing and their confidence in the asset class is also increasing. Our analysis (2) at the start of June this year revealed that 19 listed companies with a market cap of over $1 trillion had around $6.5 billion invested in Bitcoin, having originally spent $4.3 billion buying the cryptocurrency. We also found a staggering $43.2 billion worth of bitcoin is held through various bitcoin closed-ended trusts and exchange traded products.

"Many of those professional investors with holdings in cryptoassets are looking to increase their exposure and this is being driven by several factors including strong market performance during the Covid-19 crisis, more established investors and corporations endorsing the market, and the sector's infrastructure and regulatory framework improving. These trends will continue to expand.”

Nickel Digital's infrastructure is designed to offer various access points to the crypto market

Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. Since inception 24 months ago, the fund has delivered strong risk-adjusted returns with no drawdown months and Sharpe of over 4.

The Nickel Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, trend following, and momentum.

Digital Leaders DeFi Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, also called Altcoin space, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively-managed research-driven vehicle.

Nickel's Digital Gold Institutional Fund, a Bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available 7 days a week with one of the industry's lowest expense ratios.

Defensive Bitcoin Fund aims to offer institutional-grade exposure to Bitcoin while managing downside volatility of this exposure. Nickel will apply an overlay of derivative instruments to reduce downside volatility while aiming to capture the majority of the upside. Nickel aims to launch the fund in August 2021.

Footnotes

Nickel Digital commissioned the market research company Pureprofile to interview 50 wealth managers and 50 institutional investors across the US, UK, France, Germany, and the UAE. The survey was conducted online in May and June 2021.

Nickel Digital analysed data from https://bitcointreasuries.net/ on 14th June 2021

About Nickel Digital Asset Management

Nickel Digital Asset Management (www.nickel.digital) is a London-based FCA-authorised and regulated investment firm that offers a range of digital asset strategy solutions for institutional investors. Its mission is to provide an institutional grade gateway into the digital assets market for institutional investors.

The firm deploys highly sophisticated low-latency algorithmic trading, pursuing a range of arbitrage strategies in both spot and derivative markets, as well as offering directional exposure to the market aiming to capture the structural expansion of this space.

Nickel is led by a senior team of traders and investment professionals of experience gained in major Wall Street banks, such as Bankers Trust, Goldman Sachs, JPMorgan, Morgan Stanley, BofA Merrill Lynch, Rothschild, and Credit Suisse, as well as global hedge funds, including DE Shaw, Tudor, Eisler Capital, and Cheyne Capital.

Risk management is the core of Nickel's approach to investment management. This was evidenced in both March 2020 and May 2021, the times of sharp market sell off, when Nickel protected investor capital and delivered positive returns. Nickel was named by Opalesque, the hedge fund advisory firm, as top 2% of global asset managers "who delivered during the meltdown".

Nickel's flagship fund, the market-neutral Digital Asset Arbitrage fund, won HFM EuroHedge 2020 Emerging Manager Awards in the Specialist category.

Nickel Digital Asset Management is authorised and regulated by UK's FCA.

[erictheericworld]

Were Hedge Funds Right About Kaleyra, Inc. (KLR)?

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article, we look at what those funds think of Kaleyra, Inc. (NASDAQ:KLR) based on that data.

Kaleyra, Inc. (NASDAQ:KLR) investors should pay attention to an increase in support from the world’s most elite money managers recently. Kaleyra, Inc. (NASDAQ:KLR) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 13. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that KLR isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now we’re going to analyze the fresh hedge fund action surrounding Kaleyra, Inc. (NASDAQ:KLR).

Do Hedge Funds Think KLR Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in KLR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Royce & Associates held the most valuable stake in Kaleyra, Inc. (NASDAQ:KLR), which was worth $16 million at the end of the fourth quarter. On the second spot was North Run Capital which amassed $15 million worth of shares. Portolan Capital Management, Greenhaven Road Investment Management, and Athanor Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to Kaleyra, Inc. (NASDAQ:KLR), around 11.09% of its 13F portfolio. Greenhaven Road Investment Management is also relatively very bullish on the stock, setting aside 1.87 percent of its 13F equity portfolio to KLR.

Consequently, key hedge funds were breaking ground themselves. Athanor Capital, managed by Parvinder Thiara, assembled the most outsized position in Kaleyra, Inc. (NASDAQ:KLR). Athanor Capital had $7.1 million invested in the company at the end of the quarter. Philip Hempleman’s Ardsley Partners also initiated a $3.5 million position during the quarter. The other funds with brand new KLR positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Jonathan Lourie and Stuart Fiertz’s Cheyne Capital, and Christopher Hillary’s Roubaix Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Kaleyra, Inc. (NASDAQ:KLR). These stocks are Capital City Bank Group, Inc. (NASDAQ:CCBG), Greenwich LifeSciences, Inc. (NASDAQ:GLSI), Xunlei Ltd (NASDAQ:XNET), ClearPoint Neuro Inc. (NASDAQ:CLPT), Intrepid Potash, Inc. (NYSE:IPI), Daily Journal Corporation (NASDAQ:DJCO), and Tuscan Holdings Corp. (NASDAQ:THCB). All of these stocks’ market caps resemble KLR’s market cap.

As you can see these stocks had an average of 5.6 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $81 million in KLR’s case. Tuscan Holdings Corp. (NASDAQ:THCB) is the most popular stock in this table. On the other hand Daily Journal Corporation (NASDAQ:DJCO) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Kaleyra, Inc. (NASDAQ:KLR) is more popular among hedge funds. Our overall hedge fund sentiment score for KLR is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately KLR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on KLR were disappointed as the stock returned -22.6% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.