Old Hill Partners Launches New Private Debt Hedge Fund

Nov 18 2015 | 6:49pm ET

Asset-based lending specialist Old Hill Partners has launched a new hedge fund to take advantage of rising interest in private debt among institutional investors. 

The new vehicle will seek to generate current income by originating and investing in the senior secured credit instruments of corporate and asset-backed borrowers while also maintaining an emphasis on preservation of capital, according to information seen by FINalternatives

Old Hill is targeting $300 million for the fund. Given the nature of private debt investments, it is using a hybrid private equity-like structure in which the life of the fund is divided into a capital raise period, an investment period and a harvest period during which the fund’s positions will amortize, pre-pay or mature. It is further structured with a fairly typical 1.5% management fee and a 15% cut of profits over an annualized hurdle rate. 

The amount raised to date has not been disclosed, although Old Hill has reportedly begun investing from the fund. The company has significant experience in the structured asset-based lending space, having pursued similar transactions through SMAs and co-investments since its inception in 1996.

Private debt, a catch-all term to describe credit provided to issuers from non-bank sources such as alternative investment managers, has been on a tear this year. Companies have increasingly turned to non-bank sources of credit as rules and regulations implemented after the financial crisis have reduced the willingness of traditional lending institutions to participate, particularly within the small- and medium-sized business segment of the economy.

Meanwhile, institutional investors have flocked to the asset class as a potential source of above-average, uncorrelated returns. Assets dedicated to private debt and alternative lending funds have grown from $23 billion the year before the financial crisis to $75 billion in 2014, and have already surpassed more than $73 billion so far this year, according to data provider Preqin.

Founded by former Nomura executive John Howe, Darien, CT-based Old Hill Partners is an SEC-registered investment adviser specializing in customized asset-backed lending transactions with primarily middle-market companies.

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