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Fund finance shop gets investment from insurer

Large insurance firm takes minority investment in London-headquartered pref equity and debt provider that is seeing new kinds of demand for its financing

Velocity Capital Advisors, a London-headquartered provider of preferred equity and “non-dilutive” debt financing, including NAV and management company facilities, for various fund types, has taken on a minority investment from Reinsurance Group of America, a global life and health insurance company.

The insurer also agreed to a long-term investment management agreement “on behalf of one or more of its subsidiaries,” according to an announcement. Terms of the deals were not disclosed.

The deal comes as demand for NAV vehicles continues to accelerate, different sources of capital flow into the market, and new uses and structures are being tried out by borrowers.

Ed Levy, co-founder and managing partner of Velocity, told Private Funds CFO that having access to a large, publicly traded insurer’s some-$100 billion balance sheet will allow the firm more flexibility in how it can structure capital to borrowers. “Whether that’s a delayed draw term facility, or certainty of underwriting, or [being able to provide] committed underwritten facilities, including bridge facilities… There’s just a lot of variations of the product that we can now bring to bear on behalf of our borrowing community,” he said.

Levy noted that more and more managers are looking for management company facilities, for a myriad of reasons, including succession planning, replacing dilutive GP-stakes deals, and even financing the formation of a firm’s next fund. Recently, he said, he’s begun seeing firms using facilities to create funds of one in which they don’t even raise capital from third-party LPs.

The firm is also considering strategies for playing in the continuation fund market, Levy said. “We like the cadence of transactions and the ability to put capital to work, and we think we can create attractive risk adjusted returns in that market.”

Velocity has nearly $1.5 billion in assets under management.