As private equity funds grow in size, professionals in the space are faced with lengthening fund cycles, delayed exits and rising capital commitments. Here, we explore the role of a private bank in providing access to flexible leverage and supporting executives across the J-curve.
Private equity funds are getting larger, meaning private equity professionals must commit more to their funds than ever before.
Macroeconomic volatility, a higher interest rate environment and geopolitical uncertainty have pushed out portfolio exits so carried interest has not materialised in the way the market had hoped. Fund cycles are also getting longer as companies are staying private for longer.
This presents a funding challenge for some individuals – and Deutsche Bank can help create liquidity for senior private equity professionals by providing access to leverage through co-investment loan programmes.
Supporting private equity executives across the J-Curve
Co-investment facilities are sponsor-arranged financing programmes that can be used by Partners and Employees of a Private Equity firm to fund capital calls. They are generally secured by partnership interests in a diverse range of funds as well as a broader security package.
The sponsor and bank negotiate the programme terms, eligible participants, maximum borrowing limits for each borrower and the required credit support from the sponsor.
Working collaboratively towards a creative solution
In a recent case, we partnered with a large internationally renowned sponsor, to provide a co-investment facility to its European team. They had an existing facility in place with another lender but wanted to include more borrowers from across Europe, and the facility to be revolving in nature. The sponsor was attracted to Deutsche Bank Private Bank given our focus on private equity clients both across our traditional wealth management offering and our fund finance capabilities.
Simplifying complexity across jurisdictions
The deal, both multi-jurisdictional and multi-borrower in nature, has reinforced our ability to service clients across the globe. The programme was delivered collaboratively across Deutsche Bank teams in London and Luxembourg, enabling a smooth onboarding process for both UK and European participants. The GP structure was incredibly complex and involved a large number of countries, but this was further supported by early engagement with the sponsor and legal counsel.
Building long term relationships
“This successful launch represents a defining moment in Deutsche Bank Private Bank’s growing lending offering for private equity professionals and reflects our continued commitment in providing tailored solutions for our sophisticated clients,” says Anum Shahab, Relationship Manager at Deutsche Bank Private Bank.
“This transaction means we are well placed to be the house bank to all borrowers, and we have successfully broadened our relationship beyond the co-investment facility,” she adds.
Deutsche Bank has now participated in a sizeable hold of the sponsor’s subscription line facility, and we are working with our new clients to build diversified and robust investment portfolios, to complement their concentrated private equity exposure.
