- Capital commitments under management exceed the EUR 10 billion mark, Assets under Service reach EUR 10.5 billion
- Successful closing of "YIELCO Infrastructure III" and cooperation with Metzler Asset Management to launch an infrastructure fund of funds with a focus on sustainability
- Attractive product range in the private equity and private debt asset classes
- 11th YIELCO Investor Day in Munich with high response
Infrastructure as an attractive asset class with high investment requirements
In the infrastructure asset class, the multi-manager programme YIELCO Infrastructure III ("YIF III") was successfully closed at the end of March with a volume of approx. EUR 270 million. Both existing and new investors expressed their confidence in YIELCO. An increasing number of investors from abroad were also attracted, underlining the company's internationalisation strategy.
The investment strategy of YIELCO Infrastructure III is based on core+ investments in the small and mid-market and on broad global diversification across various sectors and investment years with moderate entry valuations and debt ratios. In view of the high and growing demand for private capital to finance necessary infrastructure, the asset class offers an attractive risk/return profile. "YIELCO Infrastructure III builds on the success of its two predecessors. These have successfully demonstrated the value stability, low cyclicality and inflation protection of this strategy. Stable or rising valuations of the existing portfolios in 2022 and 2023 once again underline the stability of the asset class. With 11 investments already and an attractive Core+ approach, the YIELCO Infrastructure III portfolio offers the possibility of double-digit returns with good investment protection," explains Uwe Fleischhauer, member of the Executive Board and Co-Head Infrastructure at YIELCO.
Back in May, YIELCO announced the launch of the successor fund (fourth generation) in collaboration with Metzler Asset Management for the second half of 2024. The fund will be classified in accordance with Article 8 of the EU Disclosure Regulation. The multi-manager programme with a target capitalisation of EUR 300 million is intended to continue the successful YIELCO investment strategy of the three predecessor funds for infrastructure and achieve an attractive, long-term investment return with a globally diversified portfolio of primary and secondary investments in infrastructure target funds. A universe of around 150 underlying infrastructure investments is to be covered via at least ten fund investments. Holistic ESG integration with active ESG screening is implemented in the investment process, supplemented by comprehensive and transparent reporting.
In addition to the planned infrastructure fund of funds, the co-investment fund "YIELCO Infrastructure Opportunities" is currently in pre-marketing (Art. 8 SFDR). The fund, with a target capitalisation of EUR 200 million, will co-invest in future-oriented infrastructure assets in the small and mid-cap segment with a focus on Europe and the USA alongside well-known managers. Due to the capital requirements for infrastructure investments, there are many investment opportunities in this area.
Private equity with pronounced return potential and simultaneous risk limitation through value investing
Current industry reports, including the Bain Global Private Equity Report, emphasise the importance of sustainable operational value generation as a key driver of returns. The current market environment is fundamentally different from that of the past decade. The prospect of "higher for longer" with regard to the interest rate environment and the limited availability of debt capital are having a significant impact on the private equity asset class and reduce the return prospects of buyout funds, which primarily generate their returns through financial engineering. YIELCO Private Equity USA III, the successful continuation of the sixth generation of YIELCO private equity programmes - the third with a US focus - is positioning itself in this environment by concentrating on value investing opportunities. The portfolio offers access to funds that are characterised by strong operational value creation approaches with a focus on profit growth and are able to implement complex transactions, e.g. corporate spin-offs. The programme is at an advanced stage of development with 8 capital commitments to underlying funds and a pleasing performance development to date. The fund is open until the end of January 2025.
María Sanz García, member of the Executive Board and Co-Head Private Equity at YIELCO, says: "The historically important value drivers, in particular multiple expansion and the use of debt capital, are under pressure and require an adjustment of value generation strategies. The current market environment poses major challenges, particularly for companies with high levels of debt and low cash flow. These developments emphasise the great importance of operational value creation expertise. The attractiveness of the YIELCO value investing strategy in the private equity sector is based on entry valuations well below the market level and low debt ratios. In implementing this strategy, we count on managers with strong operational skills and resources. This combination makes it possible to realise a pronounced return potential regardless of market cycles while at the same time limiting risk. This differentiated investment strategy has resulted in a highly successful portfolio that has provided our investors with significant liquidity over the past 18 months – a period marked by low activity in the broader buyout exit market."
Private debt ahead of upswing, driven by traditional banks' restraint in lending and changed market conditions
Private debt is currently experiencing a boom as an asset class: the market volume is expected to grow from USD 1.6 trillion in assets under management (March 2023) to USD 3.5 trillion worldwide by the end of 2028[1] . The upturn is being driven by the restraint of traditional banks in lending and changed market conditions.
Two multi-manager programmes are currently in YIELCO's private debt product pipeline: YIELCO Senior Debt II (optionally as Evergreen) with a planned first closing in summer 2024 and a target capitalisation of EUR 250 million by the end of 2025 and the follow-up product of YIELCO Specialty Lending, which is to be launched in the second half of 2024.
Dr Matthias Unser, member of the Executive Board and Co-Head Private Debt, comments: "YIELCO's first-generation senior private debt fund of funds programme is already fully invested and is showing a pleasing and stable performance with a gross cash yield of 11% and a loss rate of just 0.5% (including unrealised losses). The successor product in the senior debt segment is currently being launched and the first subscription deadline is planned for July 2024. Diversification is provided by the specialty lending programme with a focus on non-sponsored transactions and asset-based loans - the current portfolio of the first fund of funds has a target return of 20% gross IRR. Here too, the second generation is currently being launched."
11th YIELCO Investor Day in Munich garners strong interest
The YIELCO Investor Day took place on 16 April at the Rosewood Hotel in Munich. More than 100 participating investors enjoyed exciting presentations and discussions with leading fund managers and investors from the private debt, private equity and infrastructure sectors. In his keynote speech, Lieutenant General Frederick Benjamin Hodges, former Commanding General of the US Army in Europe and a recognised expert on military and geopolitical issues, provided fascinating insights into the current global situation against the backdrop of increasing global crises.
Disclaimer
This is a marketing advertisement. The funds described in this communication are currently in distribution or in pre-marketing pursuant to Article 30a of EU Directive 2011/61/EU of June 8, 2011, regarding managers of alternative investment funds and therefore subscriptions are not yet open. AlterDomus Management Company S.A. has been appointed as the potential AIFM of the funds. The funds are offered only to professional investors as defined in Annex II of Directive 2014/65/EU (MiFID II) and semi-professional investors according to § 330 of the German Capital Investment Code (KAGB). Investments in alternative investment funds are highly illiquid and involve high risks. The targeted high returns may not be achieved. The value of an investment may both increase and decrease. There is a risk of total loss of the invested capital.
[1] Blackrock, 2024 Private Markets Outlook, Opportunities in mega forces, p. 10 ff.
