HPS, Stonepeak Aim New Advisor Market Funds at Hot Debt, Infra Sectors
HPS, Antares and others are rolling out new private credit BDCs, while Stonepeak and Ares are among managers launching semi-liquid infrastructure funds.
By Tom Stabile | December 4 2024
HPS Investment Partners – already in the spotlight after BlackRock's blockbuster acquisition announcement this week – is planning a sequel to its strong debut in the business development company product segment with a new vehicle that expands deeper into the $148 billion manager's private credit wheelhouse, including special situations and junior debt.
Meanwhile, Stonepeak – a $70 billion infrastructure fund manager and the market's largest standalone player – is jumping into a busy market for products focused on the asset class with a new open-end registered fund focused on high-dollar individual investors that will feature periodic redemptions.
The products – both announced in new Securities and Exchange Commission filings over the past week – continue an active year for product development of private credit and infrastructure-oriented strategies for the advisor market. New filings in recent weeks also include planned BDCs from $71 billion Antares Capital and Affiliated Managers Group's Comvest Partners brand. And both Ares Management and a CION Investments-GCM Grosvenor joint venture recently launched new infrastructure funds into the market.
The market remains appealing for new players, said Jim Celico, CEO at Adaptive Distribution Group, a marketing and sales consultant."It's the early innings still," he said. "I think the successful traditional alternatives managers that might be more boutiquey – focused on niche credit or niche venture – still have an opening."
The new HPS vehicle follows on the fruitful debut of its flagship BDC in early 2022, which it largely sold initially to J.P. Morgan wealth business private bankers. That's in part because HPS was founded as a unit of the giant bank before spinning out in 2016.
That original HPS Corporate Direct Lending Fund focused primarily on senior-secured direct lending and sold well out of the gate, logging $3.5 billion in sales its first year, according to data from Robert A. Stanger & Co. Last year, when the entire BDC market took a step back in total sales, the strategy brought in $1.8 billion, but it rebounded this year, with $2.7 billion in sales through October. It trails four other BDCs in sales this year from rivals at Blackstone, Blue Owl Capital, Apollo Global Management and Ares Management, Stanger data shows.
The new HPS Corporate Capital Solutions BDC – pegged as a $4 billion fund – will expand into esoteric credit segments where HPS has long had private fund strategies. The filing states that it will invest "dynamically across the senior secured direct lending, junior capital and special situations segments of the private credit market to seek to capture what HPS believes are compelling risk-adjusted return opportunities within different market environments."
The filing states that 50% to 70% of the strategy will be in newly originated senior secured debt that will focus on "situations with perceived business or transactional complexity that require a high degree of structuring expertise to mitigate potential risk." Another 15% to 35% will be in privately negotiated second lien, junior debt and debt-like securities, including paid-in-kind interest structures. And up to 15% would be in negotiated special situations deals that "seek to exploit market inefficiencies and to resolve complicating dynamics stemming from business, industry, issuer-specific, or other challenges."
About 10% to 20% of the portfolio would be in more liquid credit investments to allow the fund to meet redemption requests, which the strategy would cap at the standard 5% per quarter of net asset value. Like other non-traded BDCs, the vehicle will offer three share classes and target investors with gross annual income of at least $70,000 and a net worth of at least $70,000, or with a total net worth of at least $250,000. The strategy would have base management fee of 1.25%
The filing states that the strategy would kick off by merging with a private BDC that HPS has created and currently has $730 million in assets. The move echoes a popular practice that allows fund managers to launch new strategies with an existing portfolio.
Both the new Antares and AMG-Comvest BDC strategies have similar formats in terms of investor audience and redemption structures. The Antares BDC would concentrate on senior secured loans to private equity-backed U.S. companies, while the AMG-Comvest product would primarily target middle market companies with annual earnings between $10 million and $100 million.
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Ameriprise affiliate Columbia Threadneedle also filed to register a new debt-focused product last week, but its vehicle would be an interval fund focused on both public and private credit.
Infrastructure Moves
The new Stonepeak-Plus Infrastructure Fund will be a continuous private offering geared toward qualified purchaser investors who have at least $5 million in assets, aiming to deliver exposure to the manager's larger infrastructure investing platform. It would offer quarterly repurchases of up to 5% of the fund's net asset value, and has base management fees of 1% to 1.25% for most share classes.
The strategy will target a mix of direct investments, secondary deals and commitments to private infrastructure funds, largely focused on equity but also investing in debt related to the asset class. Investment themes would include transportation and logistics, communications and digital infrastructure, social infrastructure and energy and energy-transition assets, the filing states.
Ares recently launched its new core infrastructure fund, and raised $400 million in September and October, said CEO Michael Arougheti during the recent manager's recent third quarter earnings call.
Distribution Challenges
Alts managers diving into the semi-liquid products market have a lot of decisions to make on the distribution front, with no set path or playbook for getting ahead with advisors, Adaptive's Celico said.
"It is infinitely more complex than the institutional distribution landscape," he said. "Institutional investor relations staff have access to sponsors or go through a consultant network – that process is widely known. But with advisors it is a bit of the Wild West and a more complicated landscape."
Many managers have chosen to build their own teams, including Ares, which bulked up its distribution effort by acquiring Black Creek Group, a real estate investment trust manager, in 2021, and since then continuing to hire.
Hiring for alts sales specialists aimed at the advisor market has remained active this year, according to Jensen Partners, a recruiter focused on alts marketing staff. The levels have jumped each period, from 108 in the first quarter to 121 in the second and 127 in the period ending Sept. 30. Jensen had counted 53 moves through mid-November in the fourth quarter.
Many of the largest managers have taken a page out of the standard mutual fund distribution model by hiring wholesalers and aiming at large brokerage platforms, and have been successful in the early going, but that might not be the model for all new players, Celico said. Another option is to initially focus on a "intelligent" telemarketing strategy, aiming to give managers dozens of high-quality independent advisor prospects who they can pitch.
"There is room for these hybrid models," he said. "Managers can use data to make better distribution decisions."