Toronto-based alternative asset manager Sagard has partnered with iCapital, an alternative investment fintech platform, to open its Sagard Private Credit Fund to accredited retail Canadian investors The fund gives them access to a diverse portfolio of private credit investments including collateralized loan obligations (CLOs) and broadly syndicated loans (BSLs).
Sagard Private Credit Fund's private credit investments will consist mainly of private loans originated by Sagard with adjustable interest rates and first repayment priority, together with more liquid credit investments. The retail investors, high-net-worth individuals, will be able to access the fund through their financial advisors, and include the assets in their Canadian registered retirement savings plans, said Adam Vigna, Sagard's co-founder and chief investment officer.
As interest in private credit continues to increase, we expect the portfolio to expand significantly over time.
The fund will target senior loans in an effort to minimize default risk. In addition to CLOs and BSLs, the fund will invest in asset-based lending such as whole loans and equity investments.
"Over time, we expect up to 10% of the fund to be invested in asset-based loans, aligning with our strategy of providing tailored credit solutions," said Vigna. However, there are no plans for the fund to include retail or commercial mortgage-backed securities. According to Sagard, direct private credit is expected to account for 65% of the fund and BSLs 25% within 12 months.
"The Sagard Private Credit Fund is evergreen, meaning it doesn't have a set limit on how large the portfolio can grow," said Vigna. "As interest in private credit continues to increase, we expect the portfolio to expand significantly over time."
Serving new markets
Sagard primarily serves institutional investors such as pension funds, financial institutions and sovereign wealth funds. However, through its partnership with iCapital, Sagard is taking its private credit fund to high-net-worth individuals, according to Vigna.
Securities included in the fund are unregulated and available only to accredited investors via their investment advisors on a monthly basis. The fund aims to offer quarterly distributions, Sagard says, but withdrawals are limited and subject to significant delays.
Founded in 2013, privately-held iCapital, which offers hedge funds, structured products, digital currency, private market and alternative investments to wealth advisors and their high-net-worth investors, is the fund's manager. Sagard Private Credit GP is its general partner for the private credit fund.
"We believe it is becoming more common for general partners to cater to both retail and institutional investors in Canada and the U.S., especially with platforms like iCapital facilitating access for accredited retail investors," said Vigna. "Both types of investors benefit from the same private credit strategies, with the fund's structure designed to accommodate the needs of both."
Middle market interest
According to Sagard, the fund will provide loans to private middle market companies, receive interest payments on those loans, and distribute the net proceeds to investors in the form of distributions, driving an initial indicative annual net return of 9%-10%.
Sagard's private credit fund will primarily focus on investing in loans to cashflow positive corporate borrowers and will target North American mid-market companies generating annual EBITDA of $5 million-$500 million, with each deal representing on average 2%-4% of the overall portfolio. Up to 20% of the assets in the portfolio will be held in Western Europe and Australia.
Strong interest helped the private credit fund raise C$50 million ($36.38 million) in initial equity capital, said Vigna. "The initial capital raised at the first closing isn't classified as institutional capital," he said.
With $25 billion of assets under management, Sagard Holdings is the alternative-investment arm of Canadian financial services holding company Power Corp. Sagard provides bespoke private credit solutions to public and private middle-market companies seeking capital in the U.S. and Canada. Its private credit subsidiary Sagard HalseyPoint has $3.1 billion under management in the CLO space.
