Alcentra, one of Europe’s largest asset managers, has raised jumbo-sized fund for direct lending as the interest of investors in lending to the region’s firms have grown significantly.
The London-based asset manager and Bank of New York Mellon subsidiary raised €5.5 billion ($6.12 billion) for its direct lending fund focused on the region. The figure was nearly double its €3 billion ($3.34 billion) minimum target.
The company said it had received strong demand from institutional investors such as pension funds, life funds, and sovereign wealth funds. These firms come from Europe, the Middle East, the US, and the Asia Pacific regions.
With the fundraising, Alcentra’s European direct lending platform’s assets under management have grown to over $10 billion, while the firm’s total asset under management surged to $39 billion.
The direct lending strategy provides investors access to private credit investment opportunities across Europe. It covers a wide range of sectors, focusing mainly on senior debt. Alcentra’s team of 28 investment and portfolio monitoring professionals seeks to generate considerable returns by lending to sponsor-owned middle-market companies.
European-focused direct lending funds have raised $11.1 billion in the first half of this year, according to data provider Preqin. This figure surged from $8.5 billion during the same period in 2018.
Vijay Rajguru, Alcentra’s chief investment officer, said that compared with the U.S., direct lending in Europe was only in its infancy.
He added that direct lending had surged in Europe after the global financial crisis prompted banks to become careful about lending to small and medium-sized enterprises.
But despite growing investor demand, fund managers are concerned about struggling to deploy capital. Preqin data reveal that European-focused direct lending funds have cash piles amounting to a record $47.6 billion.
They are also worried over a slowdown in economic growth that could hurt direct lending funds. Central banks in many nations have hinted at lowering interest rates and increased monetary easing due to concerns about growth.