Private Debt

Tailored debt funds for institutional clients

PRIVATE DEBT

 

The financing of the European economy was reshuffled after the 2008/2012 financial crisis:

  • Banking sector integration in many European countries
  • Higher capital requirements for banks (Basel 3, 4,... )
  • Solvency Capital Requirements for insurance recognizing the robustness of infrastructure assets
  • Opening of the bank monopoly in France to insurance companies and some asset managers for granting new loans
  • ECB’s accommodative monetary policy

Rivage Investment was the first asset manager to obtain the AMF approval for Direct Lending, in June 2016.

 

The benefit of specialised debt markets

We feel that specialised debt markets with specific investment themes such as infrastructure or public finance create attractive investment opportunities. Our expertise, coupled with in-depth analysis, can lead to a competitive advantage where risks can be better controlled and complexity premiums monetized. This results in potentially superior investment results than in so-called efficient markets where large numbers of participants share an almost identical access to abundant but less detailed and specific information.

 

Focus

Specialization offers the surest path to achieve the results we, and our clients, seek. Thus, we insist that each of our portfolios should focus on one investment theme and we strive to manage it as well as possible. We establish as clear and detailed an investment process as possible, and do not deviate.

 

The primacy of risk control

As a long-term and value-oriented investor, we analyze each investment with a primary focus on minimizing downside risk, protecting invested principal and generating an appropriate risk-adjusted return. This control of each investment continues throughout the life of the financing

Our investment strategy is principally based on:

  • Preliminary and strict verifications
  • Our structuring expertise
  • A disciplined approach for subscription management

Multi-channel origination

We believe that a diversified origination strategy is key in order to seize opportunities with higher risk-adjusted returns. We have direct coverage to our financial partners and private companies. We have the ability to independently originate, structure and finance numerous operations for other market players. We seek to increase the volume of projects that we originate alone or from the beginning, while gathering the information coming from traditional market players.

 

INFRASTRUCTURE DEBT FUNDS

Debt financing of infrastructure projects financing debt focused on leading European countries ("core Europe")

Infrastructure projects are the back-bone of the global economy. Significant infrastructure investments are required as a result of ageing assets in developed countries and technological evolutions such as the need for green energies. The OECD estimates the average worldwide investment volume for new infrastructure, or for the maintenance of existing infrastructure, to be around USD 1.8 trillion annually from 2010 to 2030.

 

Infrastructure debt has emerged as a natural and essential asset class for long term insurance investors, on the one hand thanks to its duration being in line with liability requirements, to the stability of its cash flows even during crisis periods on the other hand, and finally thanks to its attractive return. In addition, the Solvency II regulatory framework has strengthened the value of this asset class by giving it a lower regulatory capital requirement.

What is infrastructure ?

There is no standard definition of the term infrastructure. In general, infrastructure is considered to mean the basic facilities needed to ensure the functioning of a country’s economy. This includes the following areas:

Economic infrastucture Social infrastructure
Transport Energy & utilities Telecommunications
  • Schools
  • Hospitals
  • Prisons
  • Courthouses
  • Sports stadiums
  • Exhibition halls
  • (Toll-)roads
  • Bridges & tunnels
  • Airports & seaports
  • Railways
  • Underground railways
  • Logistics centres
  • Oil and gas pipelines
  • Gas/electricity supply
  • Gas/electricty networks
  • Water supply
  • Water distribution
  • Waste-water disposal
  • Renewable energy
  • Cable networks
  • Radio masts
  • Satellite systems

Overview of the activity

Rivage Investment’s infrastructure debt funds focus essentially on euro-denominated infrastructure debt with a primary focus on Core European countries (France, Germany, UK, Spain, Italy and Netherlands). We endeavour to finance projects that match the following key criteria:

  • Essential assets
  • Ring fenced assets
  • Efficiency proven technology
  • Secured debt
  • Steady and foreseeable cash flows
 
Infrastructure debt platform:
  • AUM on 30/03/2018: circa € 2.8 bn of commitments through 10 infrastructure debt funds (7 segregated funds, 3 pooled funds)
  • More than € 1.6 bn invested in 45 projects since Octobre 2013
  • Buy and hold diversified portfolios of essential European infrastructures
  • 50 leading European institutional investors groups have invested in our funds
 
Investment capabilities
  • Senior, junior, mezzanine, unitranche debt
  • Arranger and participant in the primary market or opportunistic investor in the secondary market
  • Achieve superior returns by capturing the illiquidity and complexity premium of the asset class
  • Investment sizes range from € 10 to € 125 million

Public Sector Debt Funds

Why invest in public sector debt?

Institutional investors such as insurers, pension funds and sovereign wealth funds have traditionally been significantly invested in government bonds. The financial crisis, however, has had a lasting impact on the long-term asset allocation strategies of institutional investors. In particular, the prolonged low-yield environment has heightened the need for return-enhancing strategies, pushing some investors to invest in alternative asset classes.

While infrastructure debt has largely benefited from this trend, public sector debt also proves to be an attractive investment alternative for institutional investors. Indeed, this asset class offers long-term investment opportunities and a significant yield pick-up compared to sovereign debt, for a comparable level of risk. Two main factors can explain this return pick-up: the rather illiquid nature of the asset class and the fact that the public sector debt market remains lesser known, with only a limited number of active lenders.

This is especially true in France, where public sector entities currently have very limited access to capital markets and fund most of their borrowing needs in the banking market.

In addition to the aformentioned advantages, public sector debt also benefits from a favourable regulatory environment. The latest development in this respect is the implementation in December 2015 of new Solvency II rules on local authorities. As a result of these new rules, exposures to French regions, departments and cities are to be treated as exposures to France for SCR purposes.

With these considerations in mind, Rivage Investment has developed a specific product offering dedicated to French public sector debt.

Overview of the activity

 
Public sector debt platform
  • AUM: 3 funds (2 segregated and one pooled) with combined AUM of € 570 Mio as of 30 March 2018
  • First closing in September 2015
  • The funds seek to generate an attractive yield pick-up over French sovereign debt by investing in long-term French public sector debt. The geographical focus is limited to metropolitan France
 
Investment capabilities
  • We currently invest in senior debt receivables owed by local and regional governments (regions, departments, cities, intermunicipal groupings), public hospitals, public social housing offices and any other type of public law entities (e.g., public development agencies, public land agencies, etc.)
  • Investment sizes range from €10 million to €50 million per issuer

CONTACT US

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