Allianz, Europe’s largest insurer, is forging ahead with its ambitious plans of establishing a new global private credit fund, according to a company spokesperson. Amid economic uncertainty and spiraling interest rates, it plans to raise a minimum of 1.5 billion euros ($1.63 billion). The move represents the company’s affirmation to reap benefits from the burgeoning private credit market, standing now at a staggering $1.5 trillion mark.
Earlier this year, in a remarkable feat, Allianz [ALVG.DE] had successfully secured 3.3 billion euros from a prior fund, achieving more than twice its initial 1.5-billion-euro target. The upcoming fund is a hope to replicate the success, with the plan to hold its first close before this year ends, a clear hint at their expected readiness to initiate further investments.
Company files reveal that the Allianz Global Diversified Private Debt Fund (AGDPDF) II was set forth in Luxembourg this past mid-June. Acting as a clever strategist rather than a straight shooter, the AGDPDF is not here to lend directly. Instead, it intends to invest in other credit funds while also securing co-investments.
The group’s portfolio of alternative investments counted a sum of 231 billion euros at June’s end, a minor fall from the total at December’s end. After a fast-paced increase in allocation to alternative investments including private equity and infrastructure, Allianz now veers its insurance business’ attention towards secure bonds in response to the rise in rates, Reuters stated earlier in the year.
In the second quarter of 2023, law firm Proskauer’s private debt index showed default rates sinking to 1.64%, following two consecutive quarters of increases. Despite the fastest rise in borrowing costs in decades posing a challenge, borrowers’ defaults have remained minimal.
The growth of private credit funds, a 2008 financial crisis’ offspring, has lured money managers, who are now in direct competition with banks, especially in large company buyouts’ financing. So far, despite the increase in interest rates causing a slowdown in fundraising among economic uncertainty, private credit funds have barely been fazed. Data from Preqin reveals more than $130 billion has been collected in 2023 so far.
The unfolding plans from Allianz Global Investors, the insurer’s money management division, are a testament to the private credit market’s potential and resilience, which is standing tall amid the challenges posed by economic uncertainties and significant rises in borrowing costs.
Article written by Pablo Mayo Cerqueiro for Reuters in London, edited by Elisa Martinuzzi and Jane Merriman.
