M&G’s private credit European Long-Term Investment Fund (ELTIF) has attracted €726m (£621m) as of the end of February, and is now available for wholesale clients throughout continental Europe.
The investment manager unveiled its very first ELTIF last November with £500m committed ahead of the launch, to tap into opportunities in the fast-growing $1.7tn (£1.3tn) private credit market. The fund – dubbed the M&G Corporate Credit Opportunities strategy – invests in direct lending opportunities and senior secured syndicated loans, targeting returns of eight to 10 per cent.
Michael George, the fund’s manager, said that the reception from investors has been positive.
“The share class has opened up a couple of weeks ago so we’re on the platform and live,” he told Alternative Credit Investor.
“We’ve spent a lot of time marketing the fund across countries in Europe and Asia.
Read more: New long-term funds set to democratise private credit
“The feedback from investors has been quite strong. They like the blend of asset classes, the liquidity and the fact that they can get into this asset class that they couldn’t get into previously, so it’s ticking boxes for lots of people.”
The ELTIF is an EU structure that has been heralded as a way to democratise access to private assets, including private credit.
Asian investors wishing to put money into the fund can put a wrap around the ELTIF or invest in euros, George said.
“Eventually we will have a Japanese share class too and the fund will hedge that back on a share class level,” he added.
“Especially for Japanese investors, Europe is looking attractive because of the swap costs from yen to euro, so general European credit looks attractive.”
Liquidity
Opening private credit up to the wealth market presents a huge opportunity to attract more diverse sources of funding, but some industry stakeholders have raised concerns about retail investors’ needs for liquidity from assets which are inherently illiquid.
M&G’s fund is separated into illiquid and liquid investments, with illiquid assets representing 15 to 30 per cent of the total portfolio.
George said that investors have had “lots of questions around liquidity” but added that the fund is in “the right position with liquidity if we need it”.
Read more: When it rains, it pours: Liquidity special report
He feels confident that the private credit investment proposition can be explained clearly to financial intermediaries.
“People might like to spin this as a complicated asset class and it isn’t,” he said. “This is simple, corporate lending, lending to companies that require debt financing whether that’s to gain returns or to buy companies.
“It’s a really simple premise; we use the analogy of buying a house to break it down to investors.
“The thing they need to get comfortable with is the liquidity but hopefully the yield is enough to compensate.”
