Deal-level yields H1 2022 vs H1 2023
US. private capital giant Blackstone is starting from Italy to begin distribution in Europe of theBlackstone European Private Credit Fund (ECRED)its new product dedicated to private investors with a focus on European private credit. To do so Blackstone has formed a partnership with Unicredit, which has a long-term perspective and will gradually cover other products. This was announced yesterday at a press meeting in Milan by Andrea Valeri, chairman of Blackstone Italia and senior managing director of Blackstone Credit; Rashmi Madan, senior managing director and EMEA head of Blackstone Private Wealth Solutions; Francesco Vitulano, managing director of Blackstone Credit in Milan; and Carlo Roncalli, principal of Blackstone Private Wealth Solutions in Milan.
The new fund is structured in the form of a Sicav under Luxembourg law, so it is available in perpetuity and invests the amounts received immediately. This is in different from closed-end funds, typical of the private credit market, as well as the private equity market, which raise investment commitments for a limited period and bind them for a number of years.
The Sicav finances in direct lending European companies with high credit profiles, providing senior loans, mostly secured, often placing itself alongside private equity funds in their acquisition transactions. With a 100 percent floating-rate portfolio, rising interest rates, along with widening spreads and increasing transaction fees, have led to double-digit returns of between 10 percent and 12 percent in recent months.
The fund prefers to invest in the debt of companies operating in non-cyclical sectors, such as software, healthcare, and professional services, in order to make the product more defensive. And again to reduce risk, provision has been made for investors to request redemption of their investment without penalty after the first year of investment. At that point redemptions could be granted within 2 percent of the fund’s assets under management on a monthly basis and within 5 percent of assets per quarter. Clearly, this limit could be reached if many investors were to request redemptions at the same time. This has already happened in the past few months in the case of a Blackstone REIT, a listed real estate fund, which was unable to liquidate all applicants. In any case, ECRED is the first fund dedicated to private credit that is not completely illiquid proposed to Italian non professional investors.
The fund will be distributed by Unicredit in Italy with a minimum investment ticket of €100,000, i.e., the minimum threshold allowed in Italy for investments in reserved alternative investment funds by non-professional investors, as amended by Italian regulations at the beginning of 2022 (seehere a previous article by BeBeez). The agreement with Unicredit in Italy is exclusive for now, while Blackstone is already negotiating with several other European banks for distribution in other countries in Europe. In particular with French banks that are also based in Italy. On the other hand, the Sicav has already been offered since last year in Asia, for example in Singapore by signing agreements with local banks, in Luxembourg, in the United Kingdom and in Switzerland where Blackstone has an exclusive agreement with Julius Baer Group. To date it has raised €240 million. A similar product, theBlackstone Private Credit Fund (BCRED)dedicated to the US market was launched over 2 and half years ago in the United States and also raised resources in Switzerland and the United Kingdom. The Blackstone Private Wealth Solutions strategy was launched 12 years ago and today has $48 billion in assets under management.
As for private credit, this is an asset class in which Blackstone has been investing for 17 years and now has $150 billion in assets under management. In Europe Blackstone Credit has been present for 15 years, has 68 professionals in 5 regional offices, and has originated investments of more than 25 billion euros.
Italy is at the top of the list of European countries where Blackstone wants to expand the activity of its Private Wealth Solutions division, the US giant’s managers said yesterday, pointing out that their estimate is that the private wealth market in our country has an estimated value of 1.1 trillion euros, which places it among the top 5 European countries in terms of private wealth, but that of this total the share allocated to alternative investments is still very small, which makes it mean that there are excellent opportunities for growth in Italy. To date, Blackstone Private Wealth Solutions’ business has about $240 billion in assets under management, with a team of more than 300 people across the United States, Europe and Asia. This growth has been fueled by tremendous demand and opportunity: globally the private wealth market is estimated at $50 trillion, and Blackstone’s research in Europe shows that professional intermediaries intend to increase alternative allocations by 20 percent over the next 2 years.
