Spotlight on Heath Fuller, Senior Managing Director & Head of Capital Markets, Robeco - NXT Capital
Global Thought Leader Spotlight
Heath Fuller, Senior Managing Director & Head of Capital Markets, Robeco - NXT Capital
“In my role as the Senior Managing Director and Investment Committee member at NXT Capital, I oversee capital market activities with an emphasis on structuring transactions, originating opportunities with direct lenders, and analysing market intelligence. NXT Capital is a leading U.S. middle market direct lending firm. I joined NXT Capital in 2010.
“Private debt has grown significantly as an asset class, due in part to the declining presence of banks in middle market lending. When compared to the level of private equity dry powder, private debt dry powder comes in at about 20% of the PE figure which we believe implies some level of market right sizing.
“The universe of investable private debt strategies has expanded significantly. For example, when deciding to invest in senior debt, LPs have many strategy options to consider, each with a different risk/return profile. Senior debt subcategories can include senior, unitranche, PE-backed, non-sponsored, lower middle market, upper middle market, etc.”
“The current environment is believed by many to be among the best senior debt investment opportunities in the last decade. From a yield perspective, all components, base rates, spreads, and OIDS have widened. In addition, loan-to-values are at historic lows. Currently, senior secured loans are yielding 11-12.5% with LTVs at 38%, which implies that LPs do not have to move out of the risk-return spectrum to generate double digit unlevered returns.
“Many say, low interest rates led investors to private debt as an enhancement for yield. But, there are additional aspects that can make private debt attractive to LPs. The floating rate nature of the asset class is a hedge on rising rates. Private loans have lower correlation to other asset classes and can provide diversification benefits. In particular, senior debt, at the top of the capital stack, offers improved protection against credit risk compared to other strategies. In the lower middle market segment, senior debt generally includes financial covenants, lower leverage multiples and higher coupon rates for improved risk return dynamics.
“PE owned companies and other middle-market borrowers will likely continue to require significant financing moving forward. This creates demand for capital and the private debt market seems ready to fulfill that need.
“For investors, private debt portfolios have the potential to generate attractive risk adjusted returns. Before investing it is key to understand a private debt manager’s strategy, resources, capabilities and experience.
“Benefits of the private debt asset class seem to make a compelling case for investor allocation in any environment. The key attributes include relatively high current yields, lower duration, enhanced credit protections and low correlation compared to other fixed income options.”
Heath will be presenting on why now is a good time to deploy capital into the U.S. private debt market, at Global Investment Institute’s upcoming Private Credit Roundtable, taking place on Thursday, 4 May 2023 at The Residence - Grand Hyatt Melbourne, Victoria.
To register your interest in attending, click here or for more information email zlatan.kapetanovic@globalii.com.au.
Heath Fuller, Senior Managing Director & Head of Capital Markets, Robeco - NXT Capital
Heath is a Senior Managing Director and Investment Committee member at NXT Capital where he is responsible for the firm’s capital markets activities, with an emphasis on structuring transactions, originating opportunities with direct lenders, and analysing market intelligence.
Heath’s career comprises 25 years of lending experience, including positions at Golub, Merrill Lynch Capital, Antares, Heller Financial and GE Capital.
Heath earned a B.A. in Finance from Michigan State University and an M.B.A. in Finance from the University of Chicago Booth School of Business.
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