Insurance Asset Risk Awards 2023 - North Americas

Private debt manager of the Year - Barings

Barings has been investing in private credit for almost 30 years. The long-term track-record has proven a critical element in maintaining its success with insurance investors – as has its focus on capital preservation. Its North American senior loan loss rate since inception is 4 bps with a default rate of 14bps. But it has also enjoyed attractive risk-adjusted returns in this segment of the business. Its North American Private Loan Fund grew to $1.8bn after launch in 2016, with a return target of 10% to 12%.

To get to this, the company employs a fundamental, rigorous approach to credit analysis and avoids certain consumer-facing businesses and those that exhibit cyclicality.

This served it well through the height of the COVID pandemic and related shutdowns – its portfolio was able to withstand the pandemic shocks and it was able to gain market share in the process.

This is continuing post-pandemic.

With borrowers facing headwinds like rising rates, wage inflation, cost inflation, and supply chain disruption that could lead to underperformance, Barings sees this as an opportunity for its private debt business.

The firm has focused on defensive sectors, cashflow generative companies, conservative deal structures, high levels of diversification, and true middle market size – $15m to $75m – to create portfolio resiliency. It committed $3.9bn in North American senior secured debt from June 2022 to June 2023.

And it is poised to capture the opportunities that lie ahead in 2023. Given the floating rate nature of its investments, potential for obtaining higher spreads and upfront fees, plus lower leverage levels, it sees this current market as very attractive from a risk/reward perspective.

That should serve it well for a business it has already progressed deeply into and all told makes it a worthy winner of private debt manager of the year.