Nuveen, the USD1.1 trillion New York-based investment manager owned by US pensions giant TIAA, has made a major move into the fast-growing European private debt market with the announcement of the acquisition of leading Europe-focused manager Arcmont Asset Management.
In the latest expansion by a big traditional asset manager into the private capital market, Nuveen is buying a controlling interest in Arcmont – a pioneer of the European private debt market, which has grown since its inception in 2011 to manage over USD20 billion in committed capital and provide financing solutions across a wide range of companies, industries, and markets.
The acquisition will expand Nuveen’s private capital reach into Europe, complementing its North American private debt and private equity investment specialist Churchill Asset Management – which manages more than USD40 billion in capital, providing customised financing solutions to middle market private equity firms and their portfolio companies across the capital structure.
Originally set up as the private debt business of credit investment firm BlueBay Asset Management, Arcmont – headed by CEO Anthony Fobel – subsequently became an independent employee-owned firm, with a minority stake held by Dyal Capital Partners that will be acquired by Nuveen as part of the deal. Nuveen is reported to be paying over USD1 billion for the acquisition.
“Arcmont provides Nuveen with a transformational opportunity to significantly expand our position in one of the world’s most dynamic investment markets and strengthen our focus on meeting the increasingly complex capital needs of clients globally,” says Jose Minaya, Nuveen’s CEO.
Since its inception, Arcmont has raised more than USD26 billion of capital from more than 350 blue-chip investors and has committed over USD20 billion to 270 transactions across Europe. With around 100 employees across six offices in Europe, the firm combines pan-European origination capabilities with long-standing relationships among private equity firms, corporates, and advisers.
“We are delighted to join Nuveen, which offers Arcmont an optimal partnership to grow our existing business model, as well as to invest in complementary adjacent strategies, leveraging Nuveen’s considerable expertise and distribution capabilities,” said Arcmont CEO Fobel.
“Drawing on the strengths of the enlarged group, we expect to extend our market position in our core business of upper middle market lending in Europe. We look forward to working closely with our new partners and expanding together into new strategies and complementary products across geographies.”
In an internal note announcing what he described as “an exciting and very important strategic step forward for Arcmont”, Fobel pointed out that the deal will give the firm access to Nuveen’s distribution and capital – noting that TIAA is the world’s largest allocator to private debt and has made multi-billion dollar commitments to Churchill’s funds.
“We are very excited to partner with Arcmont, a recognized leader in the European debt market, to build upon our position as one of the leading private capital providers in the US,” said Ken Kencel, president and CEO of Churchill.
“Together our two firms can provide our private equity clients with scaled and integrated financing solutions and our investors with access to a broader array of attractive investment opportunities from a best-in-class global private capital platform.”
Both Arcmont and Churchill will continue to operate under their respective names and brands and will continue to be led by their own respective leaderships, with no change to their respective investment teams or processes.
But the two firms will also come together to form a new entity Nuveen Private Capital, with Kencel and Fobel acting as co-CEOs and reporting to William Huffman, head of Nuveen equity and fixed income who will also serve as chairman of the new Nuveen Private Capital operation.
With more than 240 investment and support professionals, Arcmont and Churchill serve a combined investor base of some 600 institutional and family office investors – while Nuveen Private Capital will become one of the world’s largest private debt managers, with more than USD60 billion of committed capital.
“Scale is a significant differentiator in private capital fundraising and deployment, so our complementary capabilities will greatly benefit from a more diversified set of limited partners, enhancing our ability to raise capital – and also accelerating our growth across the entire private debt market,” said Minaya.
With global macro-economic headwinds likely to result in continued volatility in the liquid public markets, the largest private debt managers are expected to benefit from the strong growth trajectory of the asset class, which is an effective alternative source of financing for blue-chip borrowers in Europe and North America.
As private debt has continued to experience rapid growth, reaching a record USD1.4 trillion in AUM globally in 2022, more and more institutional investors are allocating to alternative credit as an attractive and increasingly diverse asset class.
In a statement, Nuveen said the growing importance of alternative credit in institutional portfolios was evident in its 2022 global EQuilibrium survey of 800 institutional investors and consultants, which revealed that three-quarters of investors are planning to expand their reach for yield over the next two years, with the vast majority looking to increase their exposure to alternative credit.