Garrington Capital partners with CAEP Asset Managers for easy access to diversified portfolio of more than 100 loans to SMEs in North America
Garrington Capital, a leading secured asset-based lender providing private loans to small and medium-sized enterprises across North America, is offering its Coral Cove Private Credit Strategy to a global audience via an actively managed certificate (AMC).
Garrington is working with CAEP Asset Managers, which has offices in the UK and South Africa, as the product manager. CAEP Asset Managers is in the process of applying for approval from South Africa’s FSCA for a regulated rand-based QIHF mirroring the strategy.
The Coral Cove Private Credit AMC focuses on private debt opportunities, aiming to achieve consistent, risk-adjusted returns with very low volatility.
It invests in a diversified portfolio of private credit facilities, allocating to commercial finance and secured loan investments in areas where traditional lenders are retreating – including factoring, asset-based lending, lender finance, specialty finance, real estate finance, and equipment finance.
Garrington has been operating in the lending space since 1999, funding over US$5 billion in transactions across North America since inception.
The strategy has a nine-year track record, launching in mid-2015, and has been positive each year. It gained 10.28% last year in US dollars, and has averaged 9.24% per annum over the past three years.
The strategy has a low correlation to traditional assets and low interest-rate sensitivity given that the loans primarily have short-term to medium-term maturity dates and are not publicly traded.
Garrington spreads risk across various borrowers, industries, and geographies. The focus on relatively small and shorter-term loans (primarily under US$20 million with durations of 6-24 months) provides liquidity, a rare ad- vantage in private credit markets. This allows investors to benefit from monthly liquidity in contrast to the typical long lock-up periods.
As of the end of April, the portfolio comprised more than 100 loans with an average loan to value ratio of 67% and an average term of 244 days, with around 50% of the portfolio in commercial finance, 26% in factoring and 22% in lender finance.
All loans are subject to a thorough due diligence and ongoing risk management.
By sector, commercial SME finance is the biggest exposure, at 28%, followed by energy, industrial auto and real estate.
“For example, our portfolio includes an equipment loan to a Tennessee-based regional trucking company, a senior revolving credit facility to a lender in the sub-prime auto industry in California, and a factoring facility to a Texas-based transport company specialising in the energy sector,” says Garrington Capital’s managing director Toreigh Stuart. “Over time, investors have been well rewarded for al- locating to the strategy. By choosing the right partner to invest in private debt, investors can achieve meaningful exposure to the US economy while avoiding stock market risks.”
Stuart notes that traditional investments, including equities, bonds and property, are characterised by high volatility and unpredict- able returns.
“Investors are facing the challenge of how to achieve robust returns in a volatile market while ensuring diversification and minimising risk,” he says. “Private credit opportunities offer various advantages. Historical returns have been strong relative to other fixed income vehicles, with a solid focus on preserving capital and diversification from other asset classes.”
He adds that historically private credit opportunities have been limited mostly to institution- al investors, largely due to high barriers to entry, long lock-up periods and liquidity constraints.
Coral Cove Private Credit AMC aims to solve these problems by offering an investment strategy that is easily accessible, expertly managed and offers competitive returns with liquidity provided with 90 days’ notice. A minimum investment of #10,000 makes the strategy more accessible to a wider audience of investors.
The team has developed a sophisticated approach to private credit investing, emphasizing high-quality deal origination, deep due diligence, diversification, and transparency.
Garrington Capital meticulously anlyses SMEs in Canada and the US, assessing business models, strategies, and asset values. This process includes determining the liquidation value of assets and securing loans with a secured lien on these assets. Each month, the credit underwriting team evaluates up to 100 lending opportunities, selecting only the top few, ensuring high-quality loans are approved and minimising default risk.
Coral Cove, along with its partner CAEP, have engaged GenTwo to launch the AMC. GenTwo provides a platform enabling investors access to track the performance of the Coral Cove Private Credit Strategy through a certified note with a Swiss ISIN code. This innovative structure allows investors to purchase the investment through their bank or multiple brokerage firms, just like any other security.
“Having a Swiss-issued ISIN and being able to buy or sell this via your bank or broker, as you would any other security, is an important step forward in creating broader access to our private credit strategy,” explains Stuart. “The CAEP team and our platform provider GenTwo have worked very hard, and we are excited to be working with them on this and other innovative projects.”
Stephen Pratt, founder and director of CAEP Asset Managers, adds: “We know that having a robust investment strategy is para- mount to a long-term successful relationship with a client. However, if investors are not able to conveniently access the underlying strategy, there will be limits to the strategy’s growth and distribution. The Coral Cove Private Credit AMC is the ideal product onramp for qualified investors to get exposure to a high-quality private credit investment, which is ordinarily reserved for select institutional investors.”
SOURCE:
Coral Cove takes US private debt to wider audience | HedgeNews Africa
Disclaimer: CAEP Asset Managers is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act (Act No. 37 of 2002). Past performance is not an indication of future performance.
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