Barings’ European private credit boss heralds scale and incumbency for direct lending success
SCALE and incumbency are highly important when competing in a crowded direct lending market, according to Barings’ head of European private credit and capital solutions Stuart Mathieson.
Lower interest rates on what are typically floating rate products, combined with an influx of new players into the space, have made it more challenging for managers.
Barings’ longstanding private credit platform has a $50bn (£41.4bn) capital base and Mathieson (pictured)
says it is this scale and incumbency which give it a competitive edge.
“The incumbency means that not only are we talking to the sponsors all the time, so we are able to see and compete on new platform deals, but we also benefit from significant offmarket transaction flows,” he added.
“We have a very diverse mix of capital, which puts us in a very strong position to be competitive. I think it's a very difficult business to start when you're small
because you don't have that diversity, you don't have that incumbency that drives the off-market
piece, and therefore to build scale quickly is really, really difficult.”
While Mathieson concedes that some new managers will be successful, he notes that some big brands have tried to enter the space and exited.
“If you think about running a credit portfolio, diversity is a real benefit to investors,” he added. “While there are a lot more fund managers coming into the direct lending space, I think the market is set up for those who have scale and >> 4
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Alternative Credit Investor plays a vital role in providing up-tothe-minute news and analysis for the industry and I’m proud of the fantastic engagement we have from a wide range of stakeholders.
That’s why I’m pleased to be supporting the alternative credit community with our growing array of events.
The Alternative Credit Investor COO Summit takes place on 1516 May 2025, creating a relaxed environment for senior operational leaders to network and gain valuable insights.
And this year’s Alternative Credit Awards will be held on 19 November 2025, having quickly become a must-go event in the industry calendar.
You can see more details about these events on pages 10 and 11, with regular updates set to be announced on our website (alternativecreditinvestor.com).
If you would like to attend either event, please feel free to contact me directly at suzie@alternativecreditinvestor.com
SUZIE NEUWIRTH EDITOR-IN-CHIEF
cont. from page 1
incumbency to continue to take share and be more successful. I certainly think these advantages are somewhat structural and certainly beneficial as we look ahead.”
Mathieson says longterm partnerships are crucial to running a successful direct lending business and that it is not a market “where you necessarily only win on price”.
Barings opts for the slightly more conservative end of sponsor-backed middle-market direct lending deals, with an aim of building long-term relationships. It typically lends to companies with between €10m (£8.3m) and €50m of EBITDA.
The asset manager has been hiring new private credit staff, both externally and via internal promotions, since a number of senior members of its private finance team departed for new entrant Corinthia Global Management last year.
Mathieson said that the team is now “fully resourced” although they are “always looking to hire good people” as they grow the business.
Mathieson, who has worked at Barings since 2002, said that being “a big, scaled incumbent player” with a high transaction flow will
help the firm with staff retention going forward.
“We absolutely can show people that transaction flow,” he added. “I think it's important for employers to show that development opportunity for the team. I'm a big supporter of the idea that if people are ready, we give them an opportunity to step up in their careers. For me, those are the most important retention tools.”
Barings attracted headlines last November when it launched the first European private credit collateralised loan obligation (CLO). The vehicle was backed by a portfolio of European middle-market senior secured loans and was the result of a combined effort between Barings’ global CLO team and Barings’ global private
finance group.
Mathieson said that investor appetite was “phenomenally strong” and Barings ended up upsizing the fund from €350m to €380m.
“What I found interesting is the number of investors who have subsequently spoken to me, asking why they weren’t involved and whether they can be involved next time,” he said. “Hopefully, we've set the template that others can now follow, and this will be the start of the European mid-market CLO business evolving.
“Certainly, we'll be looking at another transaction, and we've already started to think about what that looks like and when.”
Europe has been slower to see private
credit CLOs than the US, which Mathieson thinks is due to the size of the market, as CLOs need sufficient diversity in the collateral pool at the right ratings level.
“It's much easier to pull together that collateral pool [in the US],” he said. “The challenge in Europe is who can actually pull together the right collateral mix to do this. For this reason, I think that the European private credit CLO market will be slower to grow and I don’t think it will ever quite reach the same scale as we see in the US.
“The different currencies in Europe also create challenges. A dual currency CLO is not impossible, but it is more challenging. Hence why we started out with a single currency product.”
Federated Hermes direct lending boss eyes diversification 10 years after launch
IN THE offices of Federated Hermes, the word “discipline” is more than just a buzzword; it is a guiding principle. One morning before the Covid-19 pandemic, Patrick Marshall (pictured), the head of European direct lending at the asset manager, walked into the office and placed Post-it notes with the word "discipline" on every monitor. This simple gesture was a testament to his determination to maintain a disciplined approach amidst the market highs of the period.
Marshall's commitment to discipline is deeply rooted in the foundation of the direct lending business, which he established in 2015.
Now celebrating its 10th anniversary, Federated Hermes' direct lending arm, which is raising its third vintage, has always focused on collaborating with banks rather than competing with them.
When Marshall joined the company, which was called Hermes at that point, he decided that he would set up legally binding co-lending agreements with top banks.
"I'd rather be competing for the 92 per cent of the deals, than be competing with everybody else for the eight per cent, so we decided that we'd be the fund manager that works with banks, and that was key,” he said.
The agreements are exclusive and require banks to show all their loan opportunities to the team. They are also structured so that Federated Hermes and the banks co-lend on the same terms.
While many claim to work with banks, Marshall highlights the difference between genuine collaboration and mere association. He points out that without formal agreements, banks might only show deals they do not want to keep on their balance sheets.
The team invests across what Marshall has dubbed “beerdrinking Europe”, or Scandinavia, the UK, Germany and Benelux, where regulations and rules are more creditor friendly. The geographic focus is part of Marshall’s efforts to mitigate risk, which also includes a requirement to do only senior secured loans and stay away from sectors like retail and hospitality. It is the reason the fund has come through the Covid period without any impairments or defaults, he says.
His aversion to risk stems from his days at Lehman Brothers prior to the bank’s collapse.
“I saw aggressive lending prior to the bankruptcy and one of the lessons I took away was to keep things simple and keep things disciplined,” he said. “Prior to Covid, the market was again getting very aggressive. And I think some are seeing the fruits of that now.”
With this low-risk strategy now having a 10-year track record, Marshall acknowledges the need to expand into other areas, particularly looking at geographical
diversification, potentially in the US, and a broader range of offerings along the risk spectrum.
Meanwhile, he foresees further consolidation in the industry, driven by a need for greater resources to meet client demands for increased transparency and rising competition for origination. In his opinion, further regulation is also on the cards for the private credit market.
“I actually want us to be regulated to be honest, because I think some of the things that are going on in the large cap direct lending market remind me of my days at Lehman,” he said. “When you've got big direct lenders underwriting loans and then syndicating them and doing covenant light, when the market collapses, you're left with hung syndications, which then puts investors at risk. I think those direct lenders have forgotten what they're supposed to be doing, which is at the end of the day, providing money to the real economy, providing their investors with sound returns.”
Pricing and transferability are key challenges in GP-led credit secondaries
THE INCREASE in interest in general partner-led credit secondaries is bringing a whole new complexity to private markets, with managers introducing new tools to overcome some of the challenges.
One of the primary hurdles in GP-led credit secondaries is the formulation of the purchase price. Kenneth Blazejewski, a partner at Cleary Gottlieb, explains that while the pricing mechanics in equity deals are relatively straightforward, credit secondaries require careful consideration of various financial elements. He notes that credit secondaries raise questions about what constitutes "money in" and "money out" at the reference date. Factors like paid-in-kind (PIK) interest and accrued but unpaid interest must be meticulously accounted for in the purchase price. This complexity makes the valuation process more intricate compared to traditional equity deals. Adding another layer of complexity is the potential requirement for third-party agents to approve the transfer of credit assets. Unlike
equities, the official books and records of ownership in credit assets can vary, complicating the transferability process. To navigate this, parties are starting to implement a participation arrangement at closing, Blazejewski said. While this instrument is common in the credit market, its application to secondaries is relatively new.
Despite the complexities, Blazejewski added: “Credit sponsors are coming to appreciate the way in which GPled secondaries in the credit market can help deliver earlier liquidity to their investors through a transaction that doesn't require the sponsor to fully exit the assets itself. I think as there's more
education and these increase in prevalence in the market, more and more credit sponsors are going to be interested in taking advantage of it.”
Coller Capital is among a handful of firms that have actually participated in GPled credit secondaries, with partner Martins Marnauza saying that 2024 was an inflection point for the strategy.
“Throughout this year, we expect to see the number of very large portfolios coming to market continue to ramp up,” he said. “That said, for most prospective sellers engaging in the credit secondary market it remains a new and novel experience.”
A key challenge
for Marnauza is the level of awareness among GPs about the existence and advantages of the secondary option for credit.
When a deal does go ahead, Dan Drabkin, US funds partner at Clifford Chance, says lead and syndicate investors on the buy-side should consider portfolio composition and pricing carefully.
“In many cases, the portfolio will consist of several loans and other credit assets,” he said. “Understanding the nature of the assets and where within the spectrum of private credit these assets fall is critical and that will also impact pricing.
“Investors in a credit continuation fund should be focused on the terms of the acquisition of the portfolio, not just the terms of their investment in the continuation fund. It's important to ensure appropriate protections and recourse are in place.
“Investors should also understand the timing of cashflows; investors might be willing to pay a higher percentage of NAV if there is a deferral component to the purchase price or if there is leverage on the portfolio.”
Borrowers get creative as $957bn of CRE debt matures in 2025
BORROWERS are seeking out more creative debt solutions as a wave of US-based commercial real estate debt reaches maturity this year.
According to data from the Mortgage Bankers Association, $957bn (£760bn) of commercial real estate loans are due this year – a three per cent increase on the $929bn that matured in 2024.
This has led to an opening up of the funding markets, as GPs and borrowers get ahead of the maturity wall by implementing new strategies to reduce the risk of defaults.
The most popular strategy is the ‘extend and pretend’ approach, where borrowers negotiate with lenders to push back repayment deadlines, buying time while they wait for better market conditions. For those in need of more timely solutions, mezzanine financing and preferred equity have become lifelines.
“The funding markets have opened up broadly,” says Charles Sorrentino, head of investments at Rithm Capital. “This is evidenced in financing available through issuing
commercial mortgagebacked securities (CMBS) and tightening spreads of new issues.”
Sorrentino adds that he has also seen growing demand for residential transitional loans (RTLs) both in the private assetbased finance sector and in the public securitisation markets. RTLs are shortterm, high-yield loans similar to bridging loans, which can offer flexibility for borrowers who need quick liquidity without long-term commitment.
“The structural demand, from the lack of lenders, for construction and renovation financing is high,” he says. “The short duration, high yielding nature of these loans appeals to both private and institutional public investors.”
Marcello Cricco-Lizza,
managing director, portfolio manager at Balbec Capital, has also seen a rise in the use of bridging solutions.
“Many banks have pivoted from loan origination into financing bridge lenders via warehouse lines or A-notes, drastically cutting down on warehouse spreads and fees while increasing advance rates,” Cricco-Lizza adds.
“This equates to cheaper financing for bridge lenders, with some of the savings finding their way to end borrowers for high-quality properties. “For any loan with nuance or need for additional structure, the lender pool shrinks dramatically and additional spread can be earned.
“The market should expect the continued
proliferation of mezzanine and preferred lenders, who we think will step in on multifamily transactions to plug the gap in proceeds from existing debt down to where a senior loan is today,” adds Cricco-Lizza.
The refinancing wave has also led to a recovery in the CMBS markets, with lower pricing and favourable conditions making them a good tool for refinancing.
“We have already seen several CMBS transactions in Europe this year and I think given the lower pricing seen both here and in the US, we will see a significant bounce back in CMBS volumes in 2025,” notes Chris Gow, head of debt advisory, Europe at CBRE.
Despite these strategic shifts, and wider concerns about the higher rate environment, Gow says that sentiment in the real estate debt market remains “very positive”.
“Bar a small number of situations, distress levels are isolated and lenders of all types remain keen to deploy,” he says.
“We expect borrowers across most asset classes to continue looking for creative solutions for their upcoming debt maturities,” adds Sorrentino.
Navigating Europe’s alternative credit market
THE EUROPEAN
alternative credit market has grown substantially in recent years, with many global asset managers racing to secure a share. However, navigating this market is no simple task –it remains highly fragmented, with distinct legal, regulatory, and cultural differences across jurisdictions. With more than 25 years’ experience in investment management and asset servicing, Zach Lewy (pictured) understands exactly what it takes to succeed in this deeply local and complex landscape.
Lewy founded Arrow Global in 2005 and has since led the business as group chief executive and chief investment officer, transforming it into a leading pan-European investment manager specialising in private credit and real estate. Under his leadership, Arrow now manages more than €110bn (£91.3bn) in serviced assets across Western Europe. The company operates
strengthen our credit, lending and real estate presence incountry, while also deepening our insurance expertise within the Western European market we’ve built up over the years.”
been substantial harmonisation,” he says. “In reality, it's still far from a single market.”
European fund managers are often stymied by country-specific laws and regulations, which
“ We plan to continue to strengthen our credit, lending and real estate presence” “ Private credit is in a favourable position right now”
across various alternative asset classes, including opportunistic credit, lending and real estate.
“We're very comfortable with our geographic footprint,” says Lewy. “We plan to continue to
Arrow Global grew significantly after the 2008/2009 financial crisis, when Lewy identified an opportunity to take some credit business away from the banks. He observed that many European banks were over-leveraged and inefficient in terms of cost-toincome ratios. By integrating operations, compliance, capital, regulatory licences, and data excellence, he realised Arrow Global could become a major force in improving that segment of the European financial services industry.
Today, those opportunities
remain, but Lewy sees plenty of room for growth in the European alternatives space.
“I would have thought that, 40 years into the EU common market exercise, there would have
can slow down growth plans and increase the administrative burden of launching new products. Lewy points out that the largest banks in Germany, the UK, Italy, and France have minimal overlap, reflecting the lack of harmonisation in the European market.
Over the past two decades, Arrow Global has steadily built a pan-European presence. Lewy is confident that the firm is now in a position to serve its global investor base while capitalising on the compelling opportunities in the European mid-market and mitigating risk. Currently, the primary concern is the impact of lower interest rates on investor returns. However, having navigated similar credit cycles before, Lewy has built Arrow to be resilient to macroeconomic uncertainty.
“There are some strategies that do very well when interest rates are rising,” says Lewy. “Some of our lending strategies naturally
“ I’m excited about our current position”
benefit from higher rates. Other strategies thrive when rates fall – such as securitisations, structured credit strategies, and capital-expenditureintensive value-add strategies.
“I think private credit is in a favourable position right now, with viable strategies for both rising and falling interest rates. We just have to see where rates go from here.”
Looking ahead, Lewy intends to keep doing what Arrow does best. That means focusing on residential real estate and asset-backed collateral in sectors positioned for strong demographic and structural tailwinds.
“We’ve been focusing on the asset-backed sectors where we're one of the largest players in Europe,” he says.
“That includes both bulk categories and specialist categories, where we’ve established a very strong presence. The market opportunity has been strong across the board. As asset values have risen with inflation and interest rates have increased, we've benefited from improving collateral values and higher returns. This combination has given us a significant advantage.
“Looking ahead, with our panEuropean platform and multiproduct offering, I’m excited about our current position and the opportunities that lie ahead.”
Alternative Credit Awards 2025
This year’s Alternative Credit Awards will take place on 19 November 2025, at the Royal Lancaster London.
The event – hosted by Alternative Credit Investor – is the only dedicated alternative credit awards ceremony in the UK and has quickly become a mustattend industry event.
The evening will comprise a sparkling drinks reception, gala dinner and awards ceremony, commemorating the shining stars of the alternative credit industry.
Fund managers, specialist lenders and service providers will be presented with accolades on the night.
Categories will include Fund Manager of the Year, Senior Lender of the Year and Fund Administrator of the Year.
We will soon be opening to awards entries. Go to our website at alternativecreditinvestor.com for more information about the awards process.
For sponsorship and table enquiries, please email sales and marketing manager
Tehmeena Khan at tehmeena@alternativecreditinvestor.com.
The Alternative Credit Investor COO Summit 2025
Alternative Credit Investor is hosting the Alternative Credit Investor COO
Summit 2025 on 15-16 May at Chewton Glen Hotel & Spa.
This is an exclusive annual event for senior operational executives from leading private credit firms, held at a luxury five-star hotel that is easily accessible from London.
The overnight event will enable COOs and CFOs to connect and share valuable insights, through a mix of panel discussions, interactive roundtables and networking activities.
The Summit will tackle all the key topics affecting the sector, including navigating new LP requirements, the opportunities presented by AI and macroeconomic challenges.
The event is complimentary for senior operational leaders from alternative credit fund managers, including the overnight stay. Please email editor-in-chief Suzie Neuwirth at suzie@ alternativecreditinvestor.com to request your place.
For sponsorship opportunities, please email sales and marketing manager Tehmeena Khan at tehmeena@alternativecreditinvestor.com.
Capitalising on disintermediation
AXA INVESTMENT
Management Alternatives’ $100bn (£80bn) private credit business spans the depth and breadth of the market.
Christophe Fritsch (pictured), global head of alternative credit and a member of the AXA IM Alts management board, tells Alternative Credit Investor why it’s a great time to be a senior lender.
Alternative Credit Investor (ACI): What percentage of AXA IM Alts’ portfolio is currently invested in private credit? Do you expect this figure to rise or decline across 2025?
Christophe Fritsch (CF): By the end of the third quarter of 2024, AXA IM Alts managed more than $100bn in private debt and alternative credit. This segment represented roughly half of AXA IM Alts’ overall assets under management.
We do expect this figure to rise in 2025. The private credit universe has expanded in response to the bank disintermediation megatrend, with investors’ appetite for the asset class remaining strong, given its attractiveness – notably the absolute and relative return and diversification benefits.
ACI: What areas of private credit are particularly attractive to you at the moment?
CF: Beyond mid-market corporate direct lending, we believe some of the most attractive areas of private credit are currently commercial real estate (CRE) debt and specialty finance strategies like significant risk transfers (SRTs). CRE debt is attractive as it is a great time to be a senior lender
at the moment. After having corrected, real estate valuations are now stabilising in Europe which creates good entry point on the debt side. Considering the banks’ retrenchment, investors can get attractive returns, both on an absolute level and a relative value basis. The illiquidity premium against traditional fixed income seems to be at its peak.
SRT remains a unique strategy in the private debt universe that gives access to very diversified portfolios in terms of asset classes, obligors, industries and geographies. These performing portfolios correspond to the core activity of major commercial banks and are traditionally not easily available to institutional investors. Investors with strong market access that have the competencies to do the credit underwriting can still source attractive deals.
ACI: What is your outlook for private credit in the year ahead?
CF: In the past, most of the growth in assets under management for private credit has been driven by mid-market corporate direct lending following banks’ retrenchment, due to regulations and tightening lending standards.
In continental Europe, the phasein of Basel III implementation starts in 2025 for banks, although industry voices have called for further bank disintermediation to maintain the region’s competitiveness. For instance, a consultation was launched by the European Commission last year with the aim
to revive the European securitised markets.
Beyond regulation, SRT has become a common tool for capital management of banks that is well suited to the current environment, with M&A revivals and friendly shareholder policies.
Also, despite the potential deregulatory changes in the US following recent elections, we expect banks to continuously look to optimise their balance sheets to show velocity and improve long-term profitability.
Globally, we expect the disintermediation trend to continue and believe private credit should expand further to include a larger scope of underlying asset classes within asset-based finance.
ACI: Do you expect to see more retail money entering the private credit space this year?
CF: Yes, we do expect more retail money to enter the private credit space this year, notably coming from the private wealth segment. This segment is under-allocated to private credit, but there is a strong appetite for this asset class, supported by the rise of evergreen semi-liquid funds that target these individuals in the US – the non-traded perpetual business development companies. Europe has also caught up with the relaunch of the EU’s European Long-Term Investment Funds (ELTIF 2.0), effective as of January 2024 and we expect to see a similar trend, although to a lesser extent. Selecting the right asset manager is key for these vehicles given
their specificities. They must have strong origination capabilities to deploy regular subscriptions fast enough to avoid a negative impact on performance, and portfolio construction must be adapted to the fund features, such as the liquidity offered to investors.
AXA IM Alts currently manages around €6bn (£5bn) of assets under management in evergreen private market strategies for wealth investors. In October 2024, we launched our first evergreen private credit fund under ELTIF 2.0 regulation. The fund is currently available to French investors and has already raised over €230m, focusing primarily on financing private mid-sized companies. This fund enables individual savers to access an asset class historically reserved for institutional investors.
ACI: Do you have any plans to launch a private credit collateralised loan obligation in Europe?
CF: Not at this stage although we closely monitor developments in the space and expect more activity. Many factors need to be considered, including the operational setup, economics from an equity investor perspective and reaching enough diversification. You need strong origination capabilities and/or some broadly syndicated loans to reach the diversity required by the rating agencies.
ACI: To what extent is investor interest in private credit shifting?
CF: We obviously continue to see appetite for mid-market corporate direct lending, but we also see private credit investors looking to expand outside of corporates, into areas such as consumer credit given the diversification
benefit combined with the stable cashflows and shorter duration. The stabilised unemployment rate in Europe and the limited delinquencies of prime borrowers is proving supportive for the asset class and we believe private credit is definitely suited to these assets.
Selectivity and origination capabilities keep on being of critical importance. Finally, with the spreads tightening in the public markets, investors are looking for access to short-dated illiquid assets to capture the extra premium while having some natural liquidity.
ACI: How do you ensure steady origination levels?
CF: We leverage our established relationships across the entire AXA IM Alts platform and diversify our sourcing channels to maximise origination levels. We partner with banks, advisors, originators and other asset managers to source the best opportunities for our investors. We are seen by many market participants as a trusted counterparty given our investment philosophy, combined with our transparent and consistent underwriting approach. The size and variety of our mandates allow us to be nimble to answer originators needs. For example, we can look at various asset classes and play across the capital structure. Our ability to secure follow-on opportunities with existing borrowers also plays an important role in our origination.
ACI: Do you anticipate a rise in defaults in the year ahead?
CF: For corporate loans, despite several headwinds such as inflation, geopolitical events and aggressive monetary tightening from central banks, default rates have remained moderate to date reflecting a
resilient growth environment.
However, elevated financing costs have negatively affected the global economy, and we have witnessed in 2024 performance divergence both within and across sectors. For 2025, we expect defaults to slowly rise to their long-term historical averages, but I don't foresee a material increase thanks to the expected pro-growth environment and the central banks' easing cycle. From a consumer perspective, household finances are globally in good shape. The debt service ratios are at a 10-year low in most of the countries while household debt as a percentage of GDP is trending lower. Nevertheless, we also see dispersion across borrowers and regions. For 2025, we believe that the high level of savings should support future credit performance in the prime segments while the weakening trend observed in lowcredit profile borrowers should stabilise, with inflation decreasing. Overall, we anticipate the trend of idiosyncratic risk and performance dispersion across asset classes to persist. This development underscores the importance of credit selection and local market expertise to manage default risk.
ACI: Do you expect to see more consolidation in the market as demand for private credit grows?
CF: In line with the trend observed in the previous years, we do expect consolidation to continue in the private credit space. Indeed, acquisitions are often seen by asset managers as the most efficient option to build their private credit capabilities or complement their product offering. Partnerships with originators can also constitute an alternative to consolidation to increase sourcing capabilities.
Private Credit Connect: London
Exploring opportunity in direct lending, ABF, and specialty finance
26 March 2025 Hilton Bankside, London, UK
Why is this event a prime opportunity?
500
Expected Delegates
70
Private Credit Experts
1 Immersive Day
Uniting the entire private credit ecosystem, from end investors to credit funds, banks, and corporate originators.
Hear from the biggest names in private credit including Ares, Pemberton, CVC, Cambridge Associates, Tikehau, AB CarVal and more.
Mix with the market during lively panels, fireside chats, quick spotlights, polls and workshops.
the agenda, speakers and confirmed attendees.
Growing consumer credit fund opens door to new lending partnerships
NORDIX'S EUROPEAN
Consumer Credit Fund (ECCF) is seeking to expand its partnerships with consumer lenders to meet growing investor demand.
The ECCF, launched in 2021, currently manages approximately €90m (£75m) across 12 lenders in nine countries. The fund's portfolio encompasses more than 56,000 consumer loans, with an average loan size of approximately €1,200 and a weighted average life under two years.
The fund aims to maintain returns of at least four per cent, even in a zero-inflation environment. In 2024, it achieved a 6.15 per cent return net of fees, a performance level which is expected to persist through 2025. In normal market conditions, the ECCF targets returns of two to three percentage points above inflation, while maintaining low volatility and minimal correlation with equities and bonds.
“European consumer credit provides higher interest rates than traditional fixed-income products and demonstrates minimal correlation with public markets, making it an effective portfolio diversifier,” explains Claus Tumbrägel, the founder of the ECCF.
“What makes our strategy particularly compelling is how we leverage the fragmented nature of European consumer credit markets. Each country has its distinct regulatory framework, competitive dynamics, and consumer behaviour patterns, creating inefficiencies that we can exploit.
“The returns from consumer credit loans show no correlation with other risk assets, offering investors attractive
risk-adjusted returns while enhancing their asset allocation diversity.
Traditional fixed-income investments face headwinds as Europe experiences slow economic growth and the European Central Bank moves toward lower interest rates.
“Our fund provides an alternative path for conservative investors to protect and grow their capital above inflation.”
This value proposition has attracted significant investor interest, leading to steady growth in the fund's assets under management. To deploy its expanding capital base efficiently, the fund is actively seeking partnerships with additional lending platforms across Europe's diverse markets.
“As the fund grows, we intend to expand our partnerships with lending platforms throughout Europe,” says Tumbrägel.
“Our increased scale enables us to offer larger financing commitments, making us an attractive partner for previously inaccessible larger lenders.
“The fragmented nature of European consumer credit markets works to our advantage. While many investors view this fragmentation as a barrier, we see it as an opportunity to identify mispriced assets and capture value across different jurisdictions.
“These expanded partnerships will allow us to maintain our disciplined investment approach while accessing a broader pool of high-quality unsecured consumer loans.”
The fund seeks partnerships with consumer loan lenders who can demonstrate a commitment to responsible lending and thorough risk management. Potential partners must possess at least three years of operational
history, providing sufficient data for comprehensive cohort-based analysis. This enables NordIX to evaluate loan performance through key metrics including score class distribution, loan volume, interest rate trends, and default patterns.
“We select platforms with sophisticated credit underwriting processes and advanced scoring models,” explains Tumbrägel.
“Our due diligence process involves detailed examination of each platform's lending methodology, risk management framework, and servicing procedures. Regulatory compliance represents another crucial factor. NordIX evaluates platforms' adherence to local laws, including transparency requirements, interest rate caps, and loan transfer regulations.”
The fund focuses on platforms serving sub-prime and nearprime borrowers, requiring strong risk management practices and transparent reporting as essential selection criteria. Understanding local market dynamics is crucial, as lending practices, regulatory requirements, and consumer behaviour vary significantly across European countries.
This disciplined approach has driven the fund's robust growth over the past four years. With new partnerships and enhanced portfolio diversification, the ECCF stands prepared for continued success in 2025.
“A primary strategic objective for 2025 involves identifying new partners to invest our growing assets, further diversifying our lender portfolio across Europe's varied markets,” says Tumbrägel.
"We welcome pitches from suitable platforms and anticipate announcing new partnerships in the near future.”
PRIVATE CREDIT FUND
managers are growing increasingly concerned about cyber security, and with good reason. Geo-political tensions are rising, and recent history has shown us that malicious cyber activities are now seen as a very modern form of warfare.
In 2022, following the Russian invasion of Ukraine, there was a notable spike in the number of state-backed cyber attacks on Western businesses, with Russia widely viewed as the main culprit. Trump’s incoming trade tariffs and controversial foreign policies have now raised the alert level for many asset managers.
“The private credit sector, like all financial markets, is very susceptible to cyber-attacks,” says Harry West, chief information and security officer at Pepper Advantage.
“New and emerging technologies are being used to create better products and experiences for borrowers, but they also expand the attack surface for threat actors to target.”
For private credit fund managers, the key risk is that investor data could be compromised in a data breach. Investors value the discretion that private market investments offer, and they are increasingly aware of the risk posed by hackers and bad actors in the asset management space. According to the latest Core Alternative Managers’ Mood Index (CAMMI) by Gen II, 27 per cent of investors said that cyber security was a key topic during fundraising due diligence, ranking it as their number two concern, just behind liquidity.
Over the past year, a number of high profile cyber attacks have emphasised the importance of having a strong defence. Last year’s
The new front line
Cyber attacks are expected to rise, as global political tensions amplify.Kathryn Gaw asks if private credit managers are ready to take on this emerging threat.
global Microsoft outage was caused by a distributed denial of service (DDoS) cyberattack, and affected 8.5 million users, including many financial services firms. In August 2024, Fidelity Investments told 77,099 of their clients that their personal information had been stolen in a data breach, but said that it was "not aware of any misuse" of customers' personal information. The affected customers were offered two years of free credit monitoring. Meanwhile, there are some indications that regulators are taking a dim view of fund managers who fail to adequately
prepare for cyber attacks.
Earlier this year, Bayview Asset Management paid a $20m (£15.8m) settlement over cyber security weaknesses which led to a serious data breach in 2021.
The Conference of State Bank Supervisors – an organisation that represents financial regulators in US states and territories – found that the Florida-based credit manager had deficient information technology practices in place, and ordered the company to take specified corrective actions, improve cybersecurity programs, undergo independent assessments, and
“ The private credit sector…is very susceptible to cyber-attacks”
provide three years of additional reporting to state regulators.
For private credit firms, cyber attacks represent a major financial, regulatory, and reputational risk. So how can they effectively protect themselves, and their clients?
“Cybersecurity should permeate every level of an organisation, from leadership to frontline teams,” says West.
“It's a high barrier to entry
in the private credit space and needs to be part of a company's identity and culture.
“Education, awareness, and empowerment through training are essential to making cybersecurity second nature for all employees.”
West believes that traditional defences such as firewalls and endpoint security are no longer sufficient to protect against modern threats. Instead, he
suggests that companies look at advanced tools like eXtended Detection & Response (XDR) and Cloud Native Application Protection Platforms (CNAPP).
There are also some recognised global standards which fund managers can follow to ensure the safety of their operations without making heavy investments in bespoke IT plans.
The ISO 27001 certification is recognised worldwide as proof that an organisation’s information security management is aligned with best practice. In the US, the National Institute of Standards and
Technology (NIST) Cybersecurity Framework 2.0 is a set of voluntary guidelines which aims to help organisations assess and improve their ability to prevent, detect, and respond to cybersecurity risks.
Sachin Anandikar, chief technology officer at Pemberton Asset Management, says that all firms should invest in cyber hygiene, no matter their size. As a starting point, he believes that platforms should have multifactor authentication, password policies, and endpoint protection. Where possible, these firms should outsource their cyber security protocols to ensure that they are not missing any blind spots.
“What we have observed is that we as a private credit firm will not have the expertise to do all these things at a state of the art level because that takes a PhD in computer science and cybersecurity,” says Anandikar. “So we employ specialist companies, generally called Security Operation Centres who are the conduit for us to give us that expertise. So a lot of that sits within them, and we monitor them.”
These solutions are effective in managing the risk of traditional phishing, malware, ransomware, or DDoS attacks. But new cyber
own family was recently targeted by a deep fake scam, which was only identified because of his own awareness of this risk.
“My daughter got a brief phone
“ There's been a significant shift to investor portals”
threats are emerging every day, forcing technology officers such as Anandikar to be more proactive in their approach.
The rapid expansion of generative AI has made it extremely easy for bad actors to create deep fake audio and video. Anandikar’s
call from my dad recently asking for her bank account because he wanted to send some money for her birthday,” he says. “And because we’ve been talking about cybersecurity in my family, she came to me and said, I think I got a fake call. Since then, we have
instituted a safe word between us within the family to say, if ever something like that happens, you need to use this safe word to make sure that it is me.”
This sort of human stop-gap has become a useful tool in the fight against cyber fraud. Alex Di Santo, head of private equity Europe at Gen II, says that his company has avoided similar deep fake email and phone scams due to its policy of manually confirming sensitive information such as invoices. Gen II no longer sends emails with attachments to clients, and will only share client information within secure portals.
“There has been a significant
shift to investor portals,” says Di Santo. “We also insist that our clients use investor portals to exchange links securely to access the portal rather than PDFs.”
These solutions have proven effective to date, and private credit is generally viewed as being one of the more cyber-savvy and robust sectors in the financial services market due to the lack of consumer-specific data. Every time a new investor is onboarded, a new cyber risk analysis has to be conducted. For private credit firms who work with a small clutch of high-value institutional investors, this is a manageable task. However, as private credit
opens up to more high-networth individuals and wholesale investors, the cost of safely onboarding and protecting these individuals can quickly balloon.
Some industry insiders have even suggested that the risk and cost of cyber security has already discouraged some managers from expanding into the wealth market. Other fund managers have chosen to work exclusively with third party distribution channels to minimise these security risks.
“Anybody in financial services who has consumer-specific data,
“ Your first line of defence is your people”
that becomes an important target for hackers and cybersecurity criminals,” says Anandikar.
“In private credit, that doesn't exist. Having said that, it is an important area for us as there's a lot of data around investors and investments. So I think that in that sense, we are vulnerable.”
More than 90 per cent of data breaches target identity, so protecting the identity of their institutional and wealth market investors has become a growing priority for private credit firms. This usually means adopting ‘zero trust’ principles including explicit verification, least privilege, and breach assumption.
“Working in the private credit sector requires a dynamic cybersecurity strategy that keeps ahead of the constantly evolving threat landscape,” says West. “Cybersecurity needs to be embedded into every aspect
of a company's operations, including its culture.”
West adds that cyber security is about preparation, not perfection. While larger managers have the resources to either outsource or develop in-house protections and hire cyber security experts, there are plenty of things that smaller managers can to do ensure that they are meeting the highest standards of cyber security.
“Start with understanding your assets and the threats they face,” says West. “Prioritise patching, secure access, data backups and training your people. This helps you reduce your exposure, protect your assets, heighten your senses and it enables you to recover.”
In a political climate where cyber attacks are used as a tool of war, alternative asset managers may inadvertently find themselves on the front lines. The industry consensus seems to be that the entire sector should be prepared for an imminent rise in the use of virtual attacks which simply aim to cause chaos and instability in key Western markets.
More cyber attacks are inevitable, and the availability of new AI tools makes the barrier to entry that much lower for potential hackers.
Private credit managers are well placed to meet this threat, but amid increasing investor scrutiny and the proliferation of new forms of online fraud, this is no time for complacency. In a competitive space where privacy is prioritised, just one major breach can have a catastrophic impact on a fund manager’s business.
“Having cyber security permeate every aspect of a company's culture and organisation is so important,” says West. “Your first line of defence is your people.”
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