Epsilon launches second Australian corporate direct lending fund with income focus

14 June 2023: Specialist Australian middle-market corporate direct lending fund manager, Epsilon Direct Lending, has launched its second fund, the Epsilon Direct Lending Senior Loan Fund.

The launch was underpinned by a successful two-year track record from its first fund1, the Epsilon Direct Lending Fund, that has seen Epsilon raise capital from a range of prominent investors including private wealth advisory firms, multi-family offices, fund-of-funds, high-net-worth investors and small institutional investors.

The new fund seeks to tap the growing demand from investors for Australian private credit strategies that aim to deliver consistent cash yields, with capital preservation and low volatility, as well as returns which have a low correlation to equity markets, traditional fixed income investments and other private credit strategies such as broadly syndicated loan focused funds2.

Epsilon Founding Partner Joe Millward says Epsilon’s new fund will invest alongside Epsilon’s other investment vehicles and is a direct response to the market’s appetite for an Australian private credit strategy that is differentiated and uncorrelated to other available offerings.

“For this fund, investor appetite will be met via its portfolio of directly structured and documented senior secured floating rate loans to Australian and New Zealand middle-market companies. Investors find it attractive that the fund focuses on performing companies operating in non-cyclical industries, to support growth, with no loans made to property-related financing.”

The new fund has been launched in partnership with a cornerstone investor, a prominent Australian multi-family office.

Mick Wright-Smith, Co-Founding Partner at Epsilon adds: “Inflation, high interest rates and a low GDP growth has impacted corporate cashflows, but the middle market remains resilient due to its more conservative borrowing levels and relatively lower exposure to imported inflationary drivers. Middle-market focused private equity dry powder is at high-levels with many sponsors now replenished in recent times. Our investment pipeline is as strong as ever.”

Wright-Smith says that Epsilon has a strong flow of lending opportunities to help finance some of Australia’s highest quality companies and private equity investors as they seek funding for growth and event-driven purposes. The investment team has also expanded to accommodate the funding demand.

Paul Nagy, Epsilon Co-Founding Partner adds: “The rise of private credit globally has been driven from the demand from both investors and borrowers alike. From an investor’s perspective, the opportunity to access a portfolio of individually structured lending opportunities to support the growth of performing companies as a senior secured lender is appealing. For borrowers, it really comes down to having choice and a differentiated service proposition to the traditional bank lenders which provide the vast majority of this capital in Australia.”

Epsilon has supported the growth of a range of companies in the middle market to date. These include EdventureCo which is a private company and one of the largest trainers of IT professionals in Australia, and Somnomed which is an ASX-listed medical devices manufacturer and one of the world’s largest suppliers of oral sleep apnea devices, operating in 28 countries.

In an assessment of the Epsilon Direct Lending Fund in December 2022, BondAdviser maintained its ‘approved’ rating, stating its “comfort with the expertise of the investment team boasting decades of collective experience in originating, structuring, and managing loans.”
Important Information:
This information has been prepared and issued by Epsilon Direct Lending Pty Ltd (ACN 636 861 464) (EDL) a corporate authorised representative (representative number 001281871) of Guildfords Funds Management Pty Limited (ACN 602 779 993) the holder of Australian Financial Services licence number 471379, as investment manager of the Epsilon Direct Lending Senior Loan Fund, and is only for the use of persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”). This information is not available to any person who is a retail client within the meaning of section 761G of the Corporations Act. It is general information only and is not intended to provide you with financial advice, and has been prepared without taking into account your objectives, financial situation or needs. You should consider the information memorandum, available by contacting EDL on investors@epsilondl.com.au, prior to making any investment decisions. If you require financial advice that takes into account your personal objectives, financial situation or needs, you should consult your licensed or authorised financial adviser. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Guildfords Funds Management Pty Limited, as trustee of the Epsilon Direct Lending Senior Loan Fund, does not guarantee the performance of any fund or the return of an investor’s capital. This communication is current as at 14 June 2023.
Notes:
1 Past performance of the Manager is no guarantee of future performance. Other funds managed by Epsilon have a different investment focus and investment performance results and accordingly the investment performance of the Fund will vary.
2 These are targets only. The Fund may not achieve these objectives.