Corporate private credit

M&G was one of the first non-bank investors to launch an open-ended European loan fund in the market. Our strategies focus on opportunities within senior, secured European loans. These are open ended vehicles, offering access to private debt without the administrative burden associated with drawdowns.

In the current interest rate environment, the private debt assets held by this strategy can offer attractive levels of floating rate return. The opportunity set is extensive and supported through M&G’s broad European presence and extensive global network.

We combine a bottom up, active approach to investing based on fundamentals to identify value. Our scale, extensive credit research platform and expertise, together with a consistent market presence over the long term, creates competitive access to assets, enabling us to take advantage of new opportunities across the regions and sectors as they emerge.

Part of our private credit strategies are well aligned towards meeting sustainable investment objectives. By allocating to private debt as part of a sustainable investment portfolio, investors could seek attractive returns while aiming to make a clear, positive impact. 

We believe that sustainability factors can have a material impact on long-term investment outcomes. It is our belief that businesses able to incorporate sustainability best practices may be better positioned to deliver resilient performance. As patient, long term investors we support companies over the long term, throughout their business and market cycles. We are active stewards and hold the belief effective investor engagement contributes to more successful businesses. 

Our sustainable loan strategies maintain a European focus with global reach due to the breadth of opportunities in the region and the wide-ranging experience of our local teams. The full opportunity set spans across senior secured loans and FRNs; green loans, social loans, sustainability-linked loans and bonds. These investments typically consist of a minimum of 51% commitment to sustainable investments and a minimum of 70% of the overall portfolio is aligned to E (environmental) and S (societal) characteristics. 

Direct lending strategies cater to a wide range of risk/return profiles and provide attractive return potential versus public fixed income counterparts. The attractiveness of the asset class has gained considerable momentum over the last decade owing to its income-generating, risk-mitigating and diversification characteristics.

Investors allocating to direct lending strategies seek attractive risk-return potential, as well as the benefits of usually floating rate income, diversification and often, an ESG aligned investment approach.

M&G has an extensive 14 year track record investing in direct lending. We are recognised for our conservatism and invest exclusively in the senior/stretched senior space, mostly providing financing to private equity sponsor backed middle-market corporate borrowers situated predominantly in Europe. This segment is positioned in-between the broadly syndicated loan (BSL) market and unitranche direct lending market, where only a limited number of lenders currently operate. Our investment approach is therefore differentiated by its conservative leverage as well as its high quality covenant packages and robust documentation. 

Our flexible private credit strategies are open ended vehicles, benefitting from a broad and expansive investable universe, from performing corporate credit to  mid-market investing. Our investment solutions are almost exclusively floating rate; a strong hedge against inflation and duration risk through market cycles.

We cater to  a wide range of investor profiles across the liquidity spectrum. Our liquid corporate private debt solutions are broadly syndicated loans (BSL) offering quick deployment, portfolio diversity and liquidity. They typically offer downside protection afforded by security and seniority, being majority floating rate.

Our illiquid corporate private debt strategies seek to offer the best opportunities in private assets at the higher yielding end of the spectrum. These are junior loans and direct lending (large cap and mid-market) - which is now more broadly known as ‘private credit’. Illiquidity is rewarded with the inclusion of maintenance covenants. 

The development of our Margay  CLO platform builds on the Leveraged Finance team’s two decade-strong, fundamental, ‘bottom-up’ investment style in lending, in which full ESG risk factor integration has been a systematic and demonstrable feature since 2013.

Using the same, dedicated analytical and fund management resources, the Margay programme was launched and goes beyond ESG integration by investing in companies with demonstrably strong ESG risk management and opportunity characteristics. The strategy benefits from sizeable inhouse resources – in sustainability; ESG research; ESG tools; and ESG scoring and active engagement to aid quantitative analysis – while still exhibiting the intensive, granular style of the Leveraged Finance team’s approach to credit investment.

The asset class can offer an advantage over public fixed income – as it provides access to AAA to equity risk, offering a premium to public strategies backed by diversified portfolio of large cash flow driven companies.