Connection Capital raises £3m of private capital for niche private credit fund targeting underserved sub €25m loan market.
- SCIO Capital fund focuses on smaller European secured private credit deals overlooked by bigger players
Connection Capital, the specialist private client investment business, has raised a £3million commitment to SCIO Capital, a specialist European secured private credit fund manager focused on sub €25m loans – a market segment which is currently underserved.
For Connection Capital’s high net worth (HNW) clients, private credit represents an attractive opportunity for portfolio diversification at a time when valuations of liquid financial assets have been driven to historical highs. Clients were able to invest in units of £25,000. The SCIO European Secured Credit Fund III specialises in providing credit to businesses where the type, size of loan or circumstances of their loan requirements would not typically be considered suitable for the public markets and which are increasingly ignored by banks, but where there is high returns potential and limited downside risk. Loan types include acquisition finance, development loans, bridge finance and warehouse financing, and are always secured.
Since the Global Financial Crisis, European bank balance sheets have shrunk owing to tighter regulations, creating funding gaps, and fuelling the rapid growth of private credit. As an asset class, it is attractive to investors as private credit yields are materially higher than those in the public market.
SCIO’s fund size suits its focus on sub €25m loans. This focus is complemented by SCIO’s nimble approach to decision-making versus larger corporates. These factors mean it is often one of the only viable solutions for a borrower, something that it can reflect in pricing,
SCIO’s methodology has served it well in the past. Since its inception in 2009, the fund manager has had zero private loan losses and has performed consistently, demonstrating a strong track record across business cycles. In 2020, one of SCIO’s funds was named Winner of the Structured Credit Fund Award at the AltCredit Fund Intelligence European Performance Awards.
SCIO was founded by CIO, Greg Branch, former Head of the European ABS/CDO trading desk at Deutsche Bank AG in London. Previously-matured closed-ended credit funds managed by SCIO have delivered an average gross IRR (internal rate of return) of 18%.
The SCIO European Secured Credit Fund III targets a high (circa. 10%-plus) net income return from a short-term three to four-year investment. It has already invested in nine loans, with a strong deal pipeline in prospect. The fund is capped at €200m.
Lorna Robertson, Head of Funds at Connection Capital, comments, “This is an opportune time for our clients looking to further diversify their portfolios to add an investment in a niche private credit strategy targeting high net income over a short fund life, managed by an award-winning fund manager.”
“Covid-19 has increased demand in a part of the market which was already overlooked by the bigger players in the fund space and where businesses fall outside banks’ standard lending criteria. The SMEs that need finance are sound businesses that have specific and often time-critical funding needs caused by any number of factors. SCIO sees the opportunity value in negotiating secured lending packages which have the potential to provide out-sized returns for the underlying risk.”
“SCIO is considered a highly experienced specialist investor in the European private credit sector. The team, which averages 23 years’ experience in the industry and has a decade of strong performance under their belt at SCIO, is underpinned by a keen focus on protecting invested capital, and they have won well-deserved industry and product accolades in the process.”
Greg Branch, Co-Founding Partner and CIO at SCIO, comments “It’s a great time to be an alternative lender, and we are excited to be chosen by Connection Capital to provide their professional investors with access to the niche European secured private credit market where SCIO operates. Recent industry surveys expect the demand for private credit to continue and perhaps even accelerate, and in turn, we expect SCIO funds to continue to generate strong returns for the foreseeable future given the robust credit fundamentals of the existing investments and the strength of our deal pipeline.”
About Connection Capital
Connection Capital LLP is a Financial Conduct Authority authorised and regulated, specialist syndicator of investment funds from private professional investors into direct private equity, private debt and commercial property deals, as well as alternative asset funds. It currently has some £320 million of funds under management across a diverse portfolio.
Connection Capital provides a specialist managed service to help professional clients build up their own alternative asset portfolios. Private investors self-select which opportunities they want to take a stake in. Opportunities are identified and negotiated by Connection Capital, which also carries out all due diligence and manages the investment from completion through to exit, on its clients’ behalf.