Insight
It’s not very controversial to posit that private debt managers faced a double-pronged challenge in 2023: raising capital from
investors hampered by the denominator effect, and deploying capital given the market slowdown in the M&A market, writes Andy Thomson. But, at the dawn of 2024, Vivek Mathew, head of asset management at fund manager Antares Capital, was feeling more optimistic on both fronts.
Buoyed by an apparently improving macroeconomic backdrop, with talk of hard landings less in vogue and inflation having fallen faster than anticipated, New York-based Mathew thinks more confidence is filtering into the deals market. There is also, he believes, more pragmatism as differences over valuation expectations begin to be eroded – meaning that processes are more likely to reach completion rather than be pulled.
“Of course, there are many
factors to consider and markets are picking up, but we’re hearing that GPs recognise they need to return capital to their LPs to raise their next funds, and that inches them closer to selling as they come to appreciate that they may not necessarily get the multiple they thought they would prior to the middle of 2022 – but a
Strategy Why Antares is excited by Asia and the Middle East
return that is still good on a historical basis,” says Mathew. “You’re seeing the investment banks’ pipelines starting to pick up.”
On the fundraising front, Mathew sees things in private debt taking
a turn for the better. Reflecting on “excellent conversations” the firm had at its Investor Day in Zurich
in October and at a seminar in Asia attended by more than 100
Korean LPs, Mathew concluded that investors were keen not to miss the boat.
“The opportunity in private credit continues to look very attractive,” he says. “What’s interesting is that, despite being a competitive market
and off the all-time yields we may have seen recently, from a historical perspective, the yields are still quite good.”
Mathew points out that, despite 2023 being a tough fundraising year, private debt still managed to fare better than other asset classes. Reflecting on Antares’ experiences, he says: “We were quite happy we achieved our goals. Heading into
the year, we wanted to raise a certain
“ You’re seeing the investment banks’
pipelines starting to pick up ”
amount of money and we did that. We didn’t overachieve but it was almost certainly a year when you
6 Private Debt Investor • February 2024
| | |||
| “ Obviously, the region has a lot of capital reserves arising from energy and they need to put that money to work ” were likely to raise less than you asset managers such as Pimco and thought – so meeting expectations Blackstone, as well as Antares itself, felt like an overachievement.” spending a lot of time on education In July last year, the firm closed over the past three or four years, the its second senior loan fund on $6 tide is starting to turn. billion of investable capital – double “Obviously, the region has a lot of the $3 billion raised by the first fund capital reserves arising from energy in September 2020. and they need to put that money to For the year ahead, Mathew work in a more diversified manner says: “I don’t think there’ll be a than they have up to now,” says surge upwards with demand totally Mathew. “Therefore, the alternatives outstripping supply, but I think allocation is increasingly not just people will raise more money than private equity and real estate but they did in 2023.” Of course, ongoing also infrastructure, direct lending macroeconomic and geopolitical and other areas of private credit.” uncertainties are still acting as a drag Mathew sees appetite coming on market activity of all sorts. In a both from sophisticated sovereign hypothetical scenario of US Federal wealth funds as well as “family Reserve policy becoming clear and office-type capital that is basically a resolution to the war in Ukraine, institutional but with a family behind capital might once again flow freely it”. These investors are increasingly into the asset class. For now, however, persuaded by the argument that such an outcome remains firmly in even relatively safe senior debt can the theoretical realm. deliver private equity-like double- figure returns while avoiding the Beyond private equity volatility often experienced by One region where Antares is buyouts. Mathew says around optimistic that the supply of capital 10 percent of the firm’s capital for private debt will increase is the is currently accounted for by the Middle East. “Historically, alternatives Middle East but adds that he sees “a in the Middle East simply meant lot of potential”. private equity – specifically buyouts In Asia-Pacific, too, he thinks – and real estate,” says Mathew. “For education around the asset class something like private credit, there may finally be starting to bear fruit. | |||
| for 2024 | |||
| ‘Wealth’ and ‘insurance’ are two words featuring prominently in Antares Capital’s priorities for the year ahead | |||
| “So far, we have yet to really focus on wealth capital,” says Mathew. “All of our incoming capital, which continues to grow fairly consistently, has been on the institutional side. You’ll see us having more specific products designed to capture wealth capital in 2024.” On insurance, he adds: “We do have insurance company investors but we’ll have a much more focused, deliberate approach to products that are insurance-friendly. We’ve made some hires with insurance expertise, so we’ll be leaning into it more. Strategically, we feel there are a lot of potential synergies and mutually beneficial opportunities between managers and insurers.” | |||
| was limited education of its benefits and it didn’t really have a home in portfolios.” In Mathew’s view, two main factors have slowed adoption of private debt by investors in the Middle East: one, low returns relative to private equity; and two, a lack of comfort with debt that was not easily tradable. But he says that with large | “Investors there are very meticulous about data and historical track records and really want to understand who the leaders are in a given space.” Mathew hints that an increasing presence in Asia-Pacific is likely for Antares, given that the last two funds raised by the firm have seen it growing its investor base in the region. February 2024 • Private Debt Investor | 7 | |