Private Debt

Tailored debt funds for institutional clients

PRIVATE DEBT

 

We focus on identifying and successfully pursuing opportunities that deliver superior risk-adjusted returns – or to partner with others in the pursuit of above expected returns – creating synergies and adding value through the contribution of skills and experience.

 

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 where expertise and in-depth can lead to a "knowledge advantage,” where risks can be better controlled and complexity premiums monetized and thus leading to 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 do it absolutely as well as it can be done. 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

Our investment strategy is principally based on:

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

Multi-channelling origination

We believe that a diversified origination strategy is key in order to seize opportunities with higher risk-adjusted returns. We have a direct coverage of our financial partners and private companies. We are authorized to subscribe for our own investments or finance loans for other market players.

 

INFRASTRUCTURE DEBT FUNDS

Project finance infrastructure debt with a focus on core Europe

Infrastructure is 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 networks green energies (the OECD estimates average worldwide investment volume for new infrastructure, or for 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 investors with the shift from banks to institutional investors as debt providers, stimulated by a financial regulation that is increasingly more favourable to the latter (making it more costly for banks to provide long term financing and more efficient for institutional investors). Furthermore, the merits of the asset class, in terms of credit quality and resilience, are becoming more recognised.

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 infrastructure debt funds focus essentially on € denominated infrastructure debt with a primary focus on Core European countries (France, Germany, UK, Spain, Italy and Netherlands).

 
Infrastructure debt platform:
  • AUM: circa € 2.3 bn of commitments through 9 senior infrastructure debt funds ranging from € 100 to 650 mn
  • About 64 large institutional investors
  • First closing signed in October 2013
  • Buy and hold diversified portfolios of essential European infrastructures
  • Ensuring best practice in portfolio selection, due diligence and monitoring
 
Investment capabilities
  • 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
  • Investments of € 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. For example, bond financing only represented 14% of French local authorities’ total borrowings in 2014 and the number of active issuers on the primary bond market has never exceeded 30 in any given year since this market first began to develop. In 2014, 4 banks provided 87% of commercial bank loans to French local authorities.

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: circa €300m as of 15 June 2016
  • First closing in September 2015
  • The Public Law Finance Fund seeks to generate an attractive yield pick-up over French sovereign debt by investing in long-term French public sector debt. The fund’s investment strategy consists of building up a diversified portfolio of senior loans and debt securities granted to or issued by French local authorities and other public sector entities, meeting a specific set of eligibility and diversification criteria. The geographical focus is limited to metropolitan France and the target weighted average rating is AA-
 
Investment capabilities
  • We currently invest in loans granted to local and regional governments (regions, departments, cities, intermunicipal groupings), public hospitals, public social housing offices and any other type of public sector entities (e.g., public development agencies, public land agencies, etc.)
  • Investment sizes range from €10 million to €35 million per issuer
  • Our focus is on secondary loan positions, which in our view offer the best risk-return profile, but we can also invest in primary loans and debt securities
  • All investments are denominated in Euros and bear a fixed rate of interest

CONTACT US

For more information on our investment products and services, or for any issue related to the website, just follow the link below to contact us, and we will respond to your query as soon as possible