Fidelity International, with $744.8bn in total assets, has launched the Fidelity European Direct Lending Fund – its first direct lending strategy focusing on senior secured loans.
It has completed its first transaction, providing a senior financing package to Clinias Dental Group, a dental care services business in the Netherlands owned by Bencis and Clinias’ management.
Clinias is a diversified and vertically integrated dental care platform, providing dental care services in the Netherlands.Clinias’ mobile clinics also provide healthcare access to vulnerable individuals in the Netherlands.
“Improving social circumstances are a key focus of Fidelity’s ESG engagement plan with Clinias, supported by Bencis, who is highly focused on sustainability metrics in their portfolio companies,” Fidelity announced.
A spokesman at Fidelity told IPE that the size of the fund or the deal coudl not be disclosed.
Fidelity stated that direct lending as an asset class “has seen considerable growth as banks have stepped back from their traditional corporate lending role in the wake of the global financial crisis of 2007/8”.
In Europe, direct lending assets under management reached $248bn by December 2022, according tothe firm and to Preqin data.
“In a world where the outlook remains uncertain, direct lending remains in demand amongst institutional investors, as the asset class offers stable, contractual cashflows, with yields boosted by an illiquidity premium in return for a long-term capital commitment, and a good level of protection against inflation thanks to floating-rate coupons,” Fidelity continued.
Since loans are typically secured and senior in the capital structure, with structural protections to bolster risk management, downside risk can effectively be mitigated, it added.
Michael Curtis, head of private credit strategies at Fidelity, said: “A growing, and broader profile of investors are joining the structural trend to add and increase private assets allocations within their portfolios, and we expect this to expand further over time. In particular, demand for private credit has soared in recent years as institutional investors seek relative safety of a secured debt product, providing floating rate income and positioned at the most senior point of the capital structure.”
He added that Fidelity has “invested heavily” in growing the team to ensure the firm has the “right level of resource and technical capability” to drive its expansion plans.
Fidelity’s direct lending team comprises nearly 20 investment professionals.
The fund
The Fidelity European Direct Lending Fund is a Luxembourg domiciled closed-end investment vehicle, focusing on senior secured loans at the core of the mid-market, where European companies with EBITDA of around €5 to €30m operate.
The fund, which will focus on northern and western Europe, will align to Sustainable Finance Disclosure Regulation Article 8, with Fidelity’s sustainable investing framework fully integrated into the investment process.
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