First Eagle Alternative Credit is expanding into asset-based lending in a bid to capitalize on higher yields and expectations of comparatively lower defaults.
The firm has tapped Larry Klaff and Lisa Galeota, both previously at Gordon Brothers Finance Co., to lead the effort, according to a statement. They will both report to Chris Flynn, president of First Eagle.
“This is part of a growth initiative to continue to expand the product set and this is one that fits very nicely for us,” Flynn said in an interview. “It allows us to provide good risk-adjusted returns to our investors but also one more solution to our sponsors.”
First Eagle joins other firms including JPMorgan Asset Management and Arena Investors in seeking opportunities in asset-backed debt, particularly in the wake of the Covid-19 pandemic. The company sees lower defaults in this type of lending than other strategies, and can be viewed as counter cyclical, Flynn said.
“It will be in more demand today than it was in the past,” Flynn said. “This is an asset class we’ve wanted to add for several years, but it was about finding the right time and the right people.”
First Eagle may look to grow its footprint with other strategies in the future, according to Flynn.
“As we continue to expand our platform, we will look to do senior secured all the way down the capital structure to non-control equity, so I wouldn’t be surprised if you see other similar add-ons or bolt-ons from the firm going forward,” he said.
First Eagle is an alternative credit manager for direct lending and broadly syndicated investments, through public and private funds, collateralized loan obligations, separately managed accounts and co-mingled funds. The firm, a unit of First Eagle Investment Management, had $23 billion in assets under management as of March, according to its website.