Channel Capital launches private credit vehicle amid rising appetite for evergreen funds

August 22, 2024 (Preqin News) – Sydney-based Channel Capital has launched an open-ended feeder trust targeting Australian private wealth investors.

West Street European Private Credit Fund will provide access to a diversified portfolio backed by Goldman Sachs Asset Management’s (GSAM’s) European private credit strategy. The vehicle will provide senior secured debt to mid- to large-cap companies in recession-resilient industries such as healthcare and software.

‘Australian investors are increasingly interested in private credit opportunities internationally and through this fund from Channel Capital, they will be able to access the direct lending markets in Europe for diversification,’ said James Reynolds, Global Head of Direct Lending at GSAM.

Private wealth investors are increasingly looking for tailored, more liquid investment options outside of traditional private capital investment structures characterized by long-term capital lock-ups and high minimum investment levels. As a proportion of total Australian LPs, the number of family offices increased from 7% to 36% from 2019 to 2023, according to Preqin’s Australian Private Capital Market Overview.

Evergreen funds are attractive to non-institutional investors including family offices and high-net-worth individuals as they offer lower investment ticket sizes, immediate capital deployment, and periodic liquidity opportunities.

Nine years after the launch of the European Long-Term Investment Fund (ELTIF), whose objective is to increase non-bank financing for companies investing in the ‘real economy’, the European Commission announced amendments to the investment mechanism at the start of the year. The changes aim to boost the uptake of the mechanism by relaxing certain requirements.

The amendments include the removal of the minimum investment threshold, which was previously set at €10,000 ($10,946); an expanded definition of what qualifies as an ‘eligible asset’; and a rise in the borrowing cap from 30% of the ELTIF’s capital to up to 50% of the NAV for retail investors, and to 100% for ELTIFs that are reserved for professional investors only.

The number of semi-liquid funds (BDC, ELTIF, Interval Fund, LTAF, Non-Traded REIT, and Tender Offer) tracked by Preqin is currently 626 with a collective net asset value (NAV) of $390bn. However, this is a conservative figure, as a portion of funds (largely, ELTIFs and LTAFs) do not disclose.

Over 600 private debt open-ended funds have been launched in since 2022, providing private wealth investors with alternatives to traditional close-ended fund structures and more liquid opportunities.

Examples include Carlyle launching its semi-liquid European private credit strategy targeting private wealth investors earlier this year, which will invest in direct lending, opportunistic credit, and real assets credit.

Zurich Insurance Group also launched a private credit ELTIF for individuals and life insurance customers managed by Pemberton Asset Management in March of this year. In July, Germany-based Moonfare, which has over €3bn ($3.3bn) invested through its digital investment platform, also introduced its first semi-liquid strategy, focusing on secondaries.

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}