Neuberger Berman Raises $1.7 Billion for a Direct Lending Fund

(Bloomberg) -- Neuberger Berman has raised $1.7 billion for a fund that will directly lend to mid-sized companies bought out by private equity firms.

The money manager, which buys equity in some of these companies through its investments in buyout funds, is increasingly lending to the corporations as well. With the new fund, Neuberger Berman’s private credit funds will have about $4.2 billion of capital available for loans, according to a statement seen by Bloomberg News.

Led by Susan Kasser and David Lyon, Neuberger Berman Private Credit focuses on both making new loans and buying debt from other money managers. The new fund will invest in loans to private-equity backed companies with $20 million to $100 million of earnings before interest, taxes, depreciation and amortization.

The direct lending market is growing, fast catching up to the size of the more than $1 trillion dollar markets for each of U.S. leveraged loans and for high-yield bonds. Direct lenders make loans to companies and hold the investment rather than buying them from banks that put together syndicated loans.

Neuberger Berman, which has $323 billion in assets under management, invests in over 530 private equity funds and holds over 150 private equity funds advisory board seats, a relationship that the company touts as a benefit in direct lending in marketing materials seen by Bloomberg News.

The new fund, called the NB Private Debt Fund III LP, launched in October 2017 and was planned to be $1.5 billion, a target that Neuberger Berman exceeded according to the statement. Its predecessors were Fund II, which had commitments of $750 million, and Fund I which closed with $620 million of capital.

Underscoring the popularity of direct lending as an investment, Neuberger Berman’s new fund attracted capital from more than 60 institutions from around the globe, spanning the U.S., Canada, Europe, Korea, Japan and South America. That’s a geographic expansion from its first private debt fund in 2015 which attracted more than 25 institutions from North America, Europe and Japan. Investments came mostly from public and private pensions, insurance companies and foundations.

Founded in 1939, Neuberger Berman was once the prized asset management arm of Lehman Brothers but began separating from that firm as the investment bank collapsed during last decade’s financial crisis. In 2014, Neuberger Berman completed that process, becoming 100 percent employee-owned.

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