Crestline Investors has raised a $600 million fund to provide loans supporting private equity firms faced with longer investment holding periods over the past decade, its first pool dedicated to the strategy.
The new fund will offer short-term bridge loans and medium-term financing to private investment firms in need of capital to protect or help build the value of their portfolios, according to a statement Monday from Crestline. The lending strategy is designed to help the firms manage their “liquidity starved yet asset-rich” holdings, the firm said.
Crestline raised the fund after seeing a growing need for managers to navigate longer investment holding periods since the 2008 financial crisis, according to David Philipp, who co-leads the firm’s fund liquidity solutions team. With private equity firms taking longer to exit the companies they hold, calling capital from their investors isn’t an option if the investment period of their fund has ended.
“There’s a dramatic rise in the holding period,” Philipp said by phone. In a pinch, Crestline can quickly step in to provide financing to help keep a distressed company afloat, he said, or a loan to help a healthy business prepare for a sale or initial public offering.
Fort Worth, Texas-based Crestline specializes in credit and opportunistic investing, including financing for restructurings. The firm, which managed a total $10.8 billion of assets at the end of June, also runs a hedge fund focused on market-neutral strategies in equities.
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Pension plans, endowments and wealth management firms are among the institutional investors that contributed capital to Crestline’s new fund, according to the statement. The firm expects its portfolio financing pool could produce gross returns of 12 percent to 15 percent, Philipp said.
Under the strategy, Crestline will loan directly to private equity funds or the companies they own, as long as the funds are willing to borrow against their broader portfolios, according to Philipp. He is overseeing the new investment pool alongside Amit Mahajan, co-head of the firm’s fund liquidity solutions team.
“We don’t see a lot of funds doing this as a dedicated strategy,” Philipp said.
