Adams Street Partners Raises $1 Billion for First Middle Market CLO
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The establishment of a $1 billion collateralized loan obligation (CLO) by Adams Street Partners, in collaboration with American Equity Investment Life Insurance Company, marks a significant development in the private credit domain. This strategic move is poised to enhance capital efficiency, especially considering the involvement of a leading issuer of fixed index annuities like American Equity Life. The CLO, focusing on senior loans to private equity-backed mid-market companies, taps into a niche that is often underserved by traditional banks, offering potential for higher yields amidst a low-interest-rate environment.
Investors should note that CLOs are typically structured to offer various tranches with differing risk profiles, which can cater to a diverse range of investment appetites. Moreover, the partnership between a private markets investment firm and an insurance company could lead to innovative financial products that are tailored to meet regulatory capital requirements, particularly under frameworks such as Solvency II for insurers. The involvement of Adams Street's Private Credit team, which manages a substantial $9.7 billion in assets, suggests robust underwriting capabilities and a solid track record, which are important in the private credit space.
The collaboration between Adams Street and American Equity Life underscores a strategic intersection between the asset management and insurance industries. By leveraging the expertise of Adams Street in the middle market credit space, American Equity Life aims to enhance the value proposition for its policyholders and shareholders. This move aligns with the AEL 2.0 objectives, which likely include optimizing the company's investment portfolio and enhancing returns on invested capital.
For the insurance sector, investments in CLOs can be attractive due to their potential to offer stable cash flows and risk-adjusted returns, which are essential for matching long-term liabilities. However, stakeholders should be aware of the inherent risks associated with CLOs, including credit risk, interest rate risk and the complexities involved in the tranche structures. The success of such a partnership will largely depend on the continued performance of the underlying loans and the ability to effectively manage these risks.
The finalization of ASP Summa CLO indicates a growing appetite for alternative investment vehicles within the middle market segment. This trend is reflective of a broader shift in the investment landscape, where institutional investors are increasingly seeking out private credit opportunities. For businesses operating in the middle market, such financial instruments provide vital access to capital that may not be readily available through conventional banking channels.
From a market perspective, the successful launch of a sizable CLO by Adams Street could signal confidence in the middle market's growth prospects and creditworthiness. It also suggests a potential increase in institutional demand for private credit solutions, which could stimulate further innovation and competition in the sector. The joint venture's focus on insurer capital-efficient products may also set a precedent for similar partnerships, potentially reshaping investment strategies within the insurance industry.
Middle market private credit vehicle structured in partnership with American Equity Investment Life Insurance Company
ASP Summa was comprised of a high-conviction portfolio of senior loans issued by private equity backed mid-market companies and was originated through Adams Street’s Private Credit team.
“Adams Street’s first CLO represents a significant milestone for our private credit business,” said Bill Sacher, Partner & Head of Private Credit at Adams Street. “This is expected to be a capital efficient solution that will demonstrate the power of our investment platform and ability to deliver attractive solutions to AEL and insurance companies globally.”
“We are proud to partner with Adams Street on the creation of our inaugural middle market credit CLO,” said Anant Bhalla, CEO of AEL. “By combining our knowledge and expertise in insurance investment structuring with Adams Street’s lending platform which is among the best in class in the middle market, we believe we have created a superior capital solution that can deliver on key objectives outlined in AEL 2.0 and create significant value for both our policyholders and shareholders.”
Adams Street Partners’ Private Credit team manages
About Adams Street Partners
Adams Street Partners is a global private markets investment manager with investments in more than 30 countries across five continents. The firm is
This information is not investment advice or an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information. Statements are made as of the date of this release, and there is no implication that the information contained herein is correct as of any time subsequent to such date. References herein to specific sectors, strategies, or investments are not to be considered a recommendation or solicitation for any such sector, strategy, or investment. Past performance is not a guarantee of future results. Projections or forward-looking statements contained in the Paper are only estimates and there can be no assurance that the results set forth in the projections or the events predicted will be attained, and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward-looking statements. Adams Street Partners, LLC is a US investment adviser governed by applicable US laws, which differ from laws in other jurisdictions.
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Source: Adams Street Partners, LLC
FAQ
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