Allied World Joins Attanasio’s Crescent in Junk Debt Bet
Allied World, the insurer and reinsurer started by firms including American International Group Inc. (AIG), will take a minority stake in Crescent, according to a statement issued yesterday. Crescent, based in Los Angeles, will manage $500 million of the Zug, Switzerland-based insurer’s portfolio.
John Gauthier, a former Goldman Sachs Group Inc. executive who is president of Allied World Financial Services, has turned to outside firms to help oversee a portfolio of $8.2 billion. Allied World said last year that it would take a stake in MatlinPatterson and invest $500 million with the firm.
“We believe these deals will help Allied World manage our expenses, optimize our investments returns, and over time, provide earnings,” Gauthier said in the statement. “The Crescent transaction, with its diverse credit strategies, will complement our previously announced transactions.”
Crescent specializes in debt rated below investment grade and manages more than $11 billion in assets, according to the statement. Dollar-denominated, high-yield corporate bonds beat higher rated debt last year, gaining about 16 percent, according to Bank of America Merrill Lynch Index data.
Allied World will invest in asset classes including mezzanine debt, collateralized loans, direct loans, bank loans, and high-yield bonds, Gauthier said in an interview. The insurer expects to achieve a net internal rate of return on mezzanine debt of 14 percent to 15 percent, he said.
“They’ve got a lot of strategies, so we can allocate a big headline number of $500 million, but actually have it be reasonably well diversified across various strategies,” Gauthier said by phone yesterday. “When you commit $500 million, you get some reasonable fee breaks.”
Allied World has gained 28 percent in the past 12 months. The shares slipped 0.2 percent to $81.57 at 9:52 a.m. in New York.
Gauthier declined to provide the size of Allied’s stake in Crescent. Attanasio’s Brewers finished with 83 wins and 79 losses in last year’s Major League Baseball season.
“We are confident our partnership with Allied World will enhance our ability to serve the growing needs of investors,” Attanasio said in the statement.
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