Private debt: resilience and growth
In our last newsletter we focused on the immediate aftermath of the onset of the coronavirus pandemic and how Kartesia’s flexible approach meant we were able to first address the challenges faced by our portfolio companies by providing additional liquidity and then to continue deploying capital from our KSO and KCO funds. Since the start of the year, we have closed on nearly 15 transactions across Europe, including our first direct investment in Poland, evidence of the strength of our offering to small and medium-sized enterprises even at a time of great distress for global economies.
We, like many direct lenders, have been extremely busy throughout the pandemic and able to provide essential financing to support struggling companies, as well as accelerating the growth of those in sectors like biotech, e-commerce and software, which have flourished and provided crucial innovation and services where it was absolutely necessary for people struggling to adjust to life under lockdown.
The private debt model is inherently a resilient one, if we as lenders ensure we undertake appropriate due diligence and look to invest into sectors that have long-term growth potential and are less exposed to economic cyclical behaviour. We often enter transactions as the most senior creditor to minimise downside risk while also looking to maximise the upside potential for our investors and other stakeholders, through equity-like upside. Cementing this, despite the impact of the COVID-19, this year has seen the biggest cash distribution to LPs since our inception, and more than twice that of 2019.
Kartesia has certainly grown with the rising popularity of the asset class and to this end, we were delighted to announce last week the launch of a strategic partnership with CANDRIAM and its sister affiliate New York Life Investments Alternatives (“NYLIA”), which included the acquisition of 33% stake in Kartesia. This partnership is a glowing endorsement of the excellent work that has been undertaken by every single member of the team, which this year grew to over 50 professionals across investment and operations. It also means that the business will benefit from the operating and financial resources, distribution network and scale of both CANDRIAM and NYLIA to enter a new phase of development. While we remain confident that our expertise in the lower mid-market means that bigger does not necessarily equate to better, the increased geographical reach and origination capabilities of the firm will mean that we can look to consolidate our position in existing markets like the UK, Spain and Germany and also target exciting new frontiers like CEE, the Nordics and Italy. There are certainly exciting times ahead!