Chenavari Said to Target $1 Billion Europe Direct Lending Funds

Chenavari Credit Partners LLP is raising as much as $1 billion for its European direct lending funds as banks cut loans to small and medium-sized companies and real estate developers, according to two people with knowledge of the matter.

Chenavari, whose assets under management soared almost 100 times to $3.75 billion from $40 million five years ago, is seeking to deliver net annual return of about 12 percent for the strategy, said the people, who asked not to be identified because the information is private.

Chenavari is among asset managers seeking to fill the lending gap left by European banks under pressure to sell assets and cut non investment-grade lending to meet stricter capital rules. Small and medium-sized companies in Europe require an estimated 100 billion euros ($131 billion) of debt funding a year, according to a Societe Generale SA research report this month.

The credit hedge fund firm based in London hired Mike Henebery, Jerry Wilson and Darren Gibson from Palio Capital Partners LLP in February to expand its existing direct lending business, according to a statement.

Chenavari has invested more than $500 million in direct lending and the pool can be increased to as much as $1 billion by early 2014, the people said.

Officials at Chenavari declined to comment.

Fund Performance

Chenavari was founded in 2008 by Loic Fery, former global head of credit markets at Calyon. It invests across European asset-backed securities, corporate debt, European bank regulatory capital credit, and real estate financing, according to its website.

It took over the management of Lyxor Asset Management’s credit derivatives funds in November 2009, increasing its assets to $2.4 billion at the time.

The $850 million Chenavari Multi Strategy Credit Fund generated about a 4.6 percent return at the end of March for the euro-denominated MS2 class. The $390 million Chenavari Toro Capital I that invests in asset-backed securities, delivered an 8.5 percent return at the end of the first quarter. The European real estate debt strategy earned 3.7 percent, while the Regulatory Capital strategy garnered 3.1 percent, after earning 36.9 percent in 2012, according to the firm’s website.

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