Fidelity International launches first direct lending fund

16 October 2023

• Fidelity’s first European direct lending strategy focusing on senior secured loans at the core of the mid-market
• Successfully completed first transaction, providing senior financing to Clinias Dental Group

Fidelity International (‘Fidelity’), a global asset manager with $744.8 billion in total client assets, today announces the completion of a senior financing package to Clinias Dental Group (‘Clinias’), a dental care services business in the Netherlands, owned by Bencis and Clinias’ management. The transaction marks the launch of Fidelity’s first Direct Lending Fund in Europe to institutional investors.

Clinias is a diversified and vertically integrated dental care platform, providing dental care services in the Netherlands. Clinias is comprised of standard dental clinics as well as specialty clinics which operate in fast-growing niche markets, including emergency dental clinics, mobile dental clinics and oral surgery practices. Clinias’ mobile clinics also provide healthcare access to vulnerable individuals in the Netherlands. Improving social circumstances are a key focus of Fidelity’s ESG engagement plan with Clinias, supported by Bencis, who is highly focused on sustainability metrics in their portfolio companies.

First transaction for the Fidelity European Direct Lending Fund

Direct lending as an asset class has seen considerable growth as banks have stepped back from their traditional corporate lending role in the wake of the Global Financial Crisis of 2007/8. In Europe, direct lending assets under management reached $248bn by December 2022.

In a world where the outlook remains uncertain, direct lending remains in demand amongst institutional investors, as the asset class offers stable, contractual cashflows, with yields boosted by an illiquidity premium in return for a long-term capital commitment, and a good level of protection against inflation thanks to floating-rate coupons. Since loans are typically secured and senior in the capital structure, with structural protections to bolster risk management, downside risk can effectively be mitigated.

The senior financing package to Clinias marks the launch of the Fidelity European Direct Lending Fund. The Fund is a Luxembourg domiciled closed-end investment vehicle, focusing on senior secured loans at the core of the mid-market, where European companies with EBITDA of around €5 to €30m operate. The Fund, which will focus on Northern and Western Europe, will align to Sustainable Finance Disclosure Regulation Article 8, with Fidelity’s Sustainable Investing framework fully integrated into the investment process.

The fund benefits from a highly experienced team of middle market specialists, with proven origination capabilities, and access to Fidelity’s global research capabilities across public and private markets. The team, led by Michael Curtis, Head of Private Credit Strategies, each have more than 20 years of experience and can leverage Fidelity’s wider global credit research capabilities. Marc Preiser is the Portfolio Manager for the Fund.

Marc Preiser, Portfolio Manager, Fidelity International, comments: “The senior members of the team and I have spent decades investing across the healthcare and middle markets sectors and are very excited to partner with Bencis, a highly experienced private equity sponsor, and Clinias’ management, in supporting Clinias in the next phase of their expansion.

“During our analysis we were able to utilise a broad set of research insights via Fidelity’s global investment research platform, providing strong data and best practices across sector, geography and sustainability which contributed significantly to our process.”

Michael Curtis, Head of Private Credit Strategies, Fidelity International, adds: “A growing, and broader profile of investors are joining the structural trend to add and increase private assets allocations within their portfolios, and we expect this to expand further over time. In particular, demand for private credit has soared in recent years as institutional investors seek relative safety of a secured debt product, providing floating rate income and positioned at the most senior point of the capital structure.

“We have invested heavily in growing the team to ensure we have the right level of resource and technical capability to drive our ambitious expansion plans. Today, our Direct Lending team comprises nearly 20 highly experienced investment professionals, who leverage the depth and breadth of Fidelity’s wider global credit research capabilities.”

Source: Fidelity