1. What are you seeing in the market in terms of deal flow and terms, including the senior debt space?
We’ve been investing on the mezzanine side with our private equity partners for more than 20 years, throughout various market cycles. We’ve built upon that strong background and in the last several years we’ve expanded our offerings into senior debt, unitranche, and first- and second-lien offerings to complement our junior capital offerings. We continue to see good deal flow and attractive opportunities, but each of those markets is reasonably competitive at this stage of the cycle.
2. What areas are attracting investor interest?
We invest up and down the capital stack around the globe. We spend more time understanding what investors are looking for in their portfolio construction and the characteristics that follow for their portfolio, based on their asset mix. It varies. One investor may be in a negative rate environment and looking for lower risk, lower return floating rate assets in a diversified portfolio, maybe a senior-secured type of investment. Another may have lot of European exposure and only want U.S. assets, and we look at that from senior through mezz. We spend a lot of time trying to understand our investors’ portfolios . We’re trying to figure out what they’re solving for.
3. What about opportunities in Europe and Asia?
In both of those markets, we operate in the more developed areas. In Europe, our biggest market for investing is the U.K. And in Asia, our largest market is Australia. In Asia, we see opportunities across the board. In Europe, we’re not finding as many attractive mezzanine opportunities, but a larger number of unitranche opportunities. For us, the global nature of our team allows us to look for relative value across those geographies to find the best risk and reward.
4. What benefits do you get from the Babson platform and MassMutual Financial Group?
MassMutual is not only a strong parent company, they’re also a large investor and we’ve benefitted from their interest in this asset class. As a long-term investor, they’re attracted to the strong risk-adjusted returns in the asset class. Our teams across the Babson platform are really exceptional. We bring the infrastructure of a $223 billion asset manager to the benefit of our direct lending clients
5. What does 2016 hold in terms of plans to grow?
We’re in a prudent, steady growth mindset. We’ve been in this market for more than 20 years, we’ve invested through many cycles and we’ll be in the business for many years to come. We’re a core part of Babson. We’re always looking for talented professionals. As we grow, we’ll never compromise our culture. It’s a partnership, both with our private equity clients as well as with our investors, working with transparency and integrity. We have more than 50 investment professionals. I’d see us making targeted senior-level hires [and] incrementally adding more mid- and junior-level professionals. Hiring people is the most important part of what we do because good people make sound decisions and do right by the client. They live that day to day. That’s how clients know Babson, through that interaction. — By Steve Gelsi
Action item: For more information on Babson, www.babsoncapital.com/strategies/private-credit
Photo of Eric Lloyd courtesy of Babson Capital Management