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(Seoul=Yonhap Infomax) Young Tae Seo – As concerns mount on Wall Street over risks stemming from private credit, private equity firms with sector-specific expertise are gaining attention. Market specialists armed with extensive experience and information are seen as best positioned to minimize default risk and deliver stable returns. Apax, a global private equity firm specializing in mid-sized technology, services, internet, and consumer companies in the US and Europe, is recognized for its differentiated investment style.
“Lending to Mid-Sized Tech Firms in the US and Europe”
Managing approximately $80 billion (about 118 trillion won), Apax boasts over 50 years of history and sector expertise. The firm’s track record dates back to early investments in Apple in the 1970s. Apax is renowned not only for its private equity (PE) buyout strategies targeting mid-sized companies but also for its private credit business. Its private credit fund, launched in 2022, raised around $700 million (about 1.03 trillion won).
Derek Jackson, Partner overseeing Apax’s private credit investments, previously led European credit investments at the Canada Pension Plan Investment Board (CPPIB), Canada’s national pension fund. He joined Apax’s London office last year. In an interview with Yonhap Infomax on the 21st, Jackson described Apax’s fund as a “transatlantic fund investing simultaneously in the US and Europe.”
Operating from London and New York, the Apax credit investment team employs direct lending and capital solutions strategies. Apax’s direct lending focuses on providing loans to mid-sized companies owned by other private equity sponsors. While lending to sub-investment grade companies, Apax can also act as a capital sponsor for owners. The capital solutions strategy is more tailored, offering loans to companies facing special situations such as mergers and acquisitions (M&A). “Currently, expected returns in the private credit market are around 7–9%,” Jackson said, adding, “Leverage can push returns slightly higher.”
“Information Sharing with PE Team—Choose Experienced Managers”
Apax’s key differentiator in private credit is its information advantage. The ability to collect and analyze borrowers’ financial and credit data is crucial for stable principal and interest recovery, making specialist managers advantageous in the private credit market.
At Apax, nearly 200 investment professionals focus exclusively on specific sectors and the mid-market. While managing private equity funds, they share all corporate information with the credit team. “Apax is integrated,” Jackson explained, “and has a rare model in the industry.”
He cited a loan to a Canadian e-commerce company as a case exemplifying Apax’s unique approach. Apax’s private equity fund had previously exited the company, and the credit team provided acquisition financing to the new owner. Because Apax, as the former owner, had comprehensive knowledge of the company, the credit team could lend with confidence.
Apax’s information advantage also attracts borrowers. Companies prefer lenders who understand their business, and many seek out Apax for this reason.
Among Apax’s borrowers, many are software firms generating stable cash flows through subscription models. Rather than early-stage startups, Apax targets mature mid-sized companies. Jackson said he favors business models that earn subscription fees for providing essential software to enterprises, noting such businesses can generate cash flow even in challenging economic conditions.
Addressing recent concerns about potential risks in the private credit market, Jackson countered, “Credit is inherently a relatively low-risk asset class,” emphasizing that creditors are repaid before shareholders.
He added, “Credit is managed through diversified portfolios.” Properly designed credit portfolios are built to survive periods of high corporate default rates, such as during the global financial crisis or the COVID-19 pandemic.
Above all, Jackson stressed, “It’s critical to select managers who not only conduct thorough credit assessments but can also continue investing during economic downturns,” adding, “Choosing experienced managers is key.”
ytseo@yna.co.kr
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