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New Epsilon senior loan fund to tap demand for private credit
Private credit purveyor Epsilon Direct Lending has built on the success of its direct lending fund with the launch of a new fund based on directly structured senior secured floating rate loans to “high quality, credit-worthy” antipodean middle-market companies.
The specialist corporate direct lending fund manager’s new fund will aim to cater to the Australian investment market’s appetite for conservative private credit strategies that can deliver steady cash yields while preserving capital and moderating volatility. The fund’s management team says the fund will have low correlation to equity markets and traditional fixed-income investments, as well as other types of private credit strategies.
It’s this differentiation and non-correlation, Epsilon founding partner Joe Millward says, that will set the fund apart from its peers in the Australian private credit market.
“For this fund, investor appetite will be met via its portfolio of directly structured and documented senior secured floating-rate loans to high-quality, credit-worthy Australian and New Zealand middle-market companies,” Millward explains.
“Investors find it attractive that the fund focuses on performing companies operating in non-cyclical industries, to support growth, with no loans made to property-related financing.”
The launch of the new fund comes after Epsilon’s inaugural fund, the Epsilon Direct Lending Fund, celebrated its two-year inception anniversary. The original fund saw the team raise capital from private wealth advisory firms, multi-family offices, fund-of-funds, HNW investors and small institutional investors.
For the new fund, Epsilon forged a partnership with a prominent Australian multi-office family as the cornerstone investor.
“Inflation, high interest rates and low GDP growth have impacted corporate cashflows, but the middle market remains resilient due to its more conservative borrowing levels and relatively lower exposure to imported inflationary drivers,” said Mick Wright-Smith, Epsilon’s co-founding partner. “Middle-market focussed private equity dry powder is at high levels, with many sponsors now replenished in recent times. Our investment pipeline is as strong as ever.”
The team’s investment resources are growing, Wright-Smith added, in line with funding demand.
According to fellow co-founding partner Paul Nagy, the rise of private credit globally has been driven by demand “from both investors and borrowers”. “From an investor’s perspective, the opportunity to access a portfolio of well-structured lending opportunities to support the growth of quality companies as a senior secured lender is appealing,” Nagy said. “For borrowers, it really comes down to having choice and a differentiated service proposition to the traditional bank lenders which provide the vast majority of this capital in Australia.”
*This article was first published in The Inside Adviser.
