TCW is launching a real estate debt strategy as it seeks to grow its alternatives business and compete with other money managers moving into the $1.6 trillion private credit industry.
The firm, which oversees more than $200 billion, will provide privately arranged debt to borrowers for core real estate and value-add credit, Chief Executive Officer Katie Koch said in an interview. Los Angeles-based TCW is also in the process of hiring a team to help run the new real estate business, she said.
TCW is among dozens of money managers diversifying beyond bread-and-butter bond investing and trying to grow higher fee-paying alternatives businesses to compete in the rapidly expanding world of private credit. Instead of growing through acquisitions, as others have done in recent years, Koch said the firm plans to expand through partnerships, particularly with insurers, to preserve its culture.
Aside from real estate, TCW also plans to close a rescue financing fund early next year with a target size of $1 billion, according to people familiar with the matter, who asked not to be identified discussing private information. The strategy will help finance companies wrangling with high interest rates and debt. Koch said TCW is working on a record pipeline of these deals.
"We're working with companies that had upside-down capital structures that were put in place back when rates were expected to stay at zero," she said. "They're struggling under a heavy interest burden and we're working closely with management teams to help them get to the other side. So we're stepping in and financing companies when no one else can or will."
The real estate strategy, along with the growth of other private credit products, will initially be anchored by a $3.25 billion investment from Nippon Life Insurance Co., Koch said. Nippon will also invest an additional $550 million in TCW, of which credit alternatives accounts for over $16 billion.
"The landscape is changing rapidly," Koch said. "Borrowers have more options."
Earlier this year, TCW launched a private credit asset-backed finance strategy, and next year it plans to debut its first-ever strategy focused on investing in equity tranches of collateralized loan obligations.
Insurers and pension plans have been piling into CLOs this year, spurring hedge funds and other money managers to pool money for strategies solely dedicated to such investments.
