Federated Hermes, a global leader in active investment management, has announced the successful foundation close of its European Direct Lending III Fund (EDL III), the third fund vintage of its European direct lending platform.
Federated Hermes, a global leader in active investment management, has announced the successful foundation close of its European Direct Lending III Fund (EDL III), the third fund vintage of its European direct lending platform.
This first phase of fundraising has attracted commitments of 50% of the total fund target size, from both existing investors in previous vintages, as well as new institutional investors, with further closes expected to be held in 2025.
Federated Hermes’ direct lending funds aim to provide investors attractive, stable and risk adjusted returns which focus on capital preservation and a stable income by lending to high-quality, non-cyclical small and mid-sized businesses domiciled in Northern Europe. Since launching its maiden fund in 2016, the Direct Lending team has maintained a zero-default rate which can be attributed to a focus on conservatively structured loans, non-cyclical end markets, and high levels of recurring revenue and cash flow conversion.
Federated Hermes has partnered with four major commercial banks in Europe and the UK, offering a differentiated origination approach in this market which, in conjunction with the capabilities of the investment team, provides a high-quality pipeline of investments. As a result of these origination capabilities, Federated Hermes’ experienced Direct Lending team reviews hundreds of potential investments a year, enabling them to invest in only the highest quality loans that meet stringent criteria and that afford traditional lender protections.
The structuring of loans takes into account ESG factors to encourage change in behaviours with the aim of providing superior outcomes and reducing downside risk. The investment team conduct ESG analysis on every loan in the portfolio, assigning each with a proprietary ESG rating, which is monitored quarterly for the life of each loan.
Investors continue to see value in our direct, senior secured lending fund franchise due to its potential to generate attractive risk-adjusted returns through capital preservation and stable income above levels provided by comparable fixed income assets. Our clients have historically benefited from our highly risk-managed approach, which incorporates ESG and focuses on lending to high-quality businesses in non-cyclical sectors. Our distinct origination capabilities working in partnership with some of Europe’s leading banks, generates robust deal flow, allow us to access high quality credit opportunities and enable us to be credit-pickers rather than credit-takers in an increasingly competitive market. Patrick Marshall, Head of Private Credit, Federated Hermes
We are extremely pleased by the strong investor support we have seen for EDL III to date. It has been especially pleasing to see existing clients commit to EDL III in larger sizes than previous vintages, a real testament to the track record of our experienced Private Credit investment team. We would like to thank our existing and new investors for their trust and look forward to working with them to achieve their investment objectives. Jakob Nilsson, Head of Private Markets Sales ex North America, Federated Hermes
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