ALTERNATIVE
The middle market direct lending strategy seeks to generate current income with a focus on capital preservation. The strategy focuses on directly originated, senior secured loans to sponsor-backed US middle-market companies.
A disciplined approach to credit investing emphasising strong fundamentals, risk management and resilience across market cycles.
Key characteristics
Focus on quality businesses
Invests in companies with leading market positions, strong cash flows and defendable competitive advantages in industries with positive fundamentals
Defensive sector focus
Seeks to target resilient, non-cyclical sectors, with an emphasis on control over deal terms and structure
Experienced team
Man Varagon is led by a team of well-seasoned, senior investment professionals, with an average of more than 20 years of experience investing across asset classes, industries and business cycles. The team seeks to ensure that the yield, spread and overall return are adequate based on the fundamental credit risk it takes on any specific investment
This strategy overview is for information purposes to illustrate the capabilities and approach of relevant investment teams at Man Group. Any organisations, financial instrument or products described herein are mentioned for reference purposes only which should not be considered a recommendation for their purchase or sale.
The below highlights some key potential risks associated with this strategy and should not be considered a comprehensive list.
Market Risk - The Strategy is subject to normal market fluctuations and the risks associated with investing in international securities markets and therefore the value of your investment and the income from it may rise as well as fall and you may not get back the amount originally invested.
Counterparty Risk - The Strategy will be exposed to credit risk on counterparties with which it trades in relation to on-exchange traded instruments such as futures and options and where applicable, ‘over-the- counter’("OTC","non-exchange") transactions. OTC instruments may also be less liquid and are not afforded the same protections that may apply to participants trading instruments on an organised exchange.
Currency Risk - The value of investments designated in another currency may rise and fall due to exchange rate fluctuations. Adverse movements in currency exchange rates may result in a decrease in return and a loss of capital. It may not be possible or practicable to successfully hedge against the currency risk exposure in all circumstances.
Liquidity Risk - The Strategy may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely and cost efficient sale of trading positions can be impaired by decreased trading volume and/or increased price volatility.
Tax Risk - The tax advantages this strategy seeks to take advantage of may not be available to all investors, consult with your tax professional prior to making investment decisions.
Political Risk - The Strategy may be subject to additional risks which include possible adverse political and economic developments, possible adoption of governmental restrictions which might adversely affect the payment of rent, principal, interest and other amounts to investors located outside the country where the property is located, whether from currency blockage or otherwise. In addition, political or social instability or diplomatic developments could affect investments in those countries. While the Firm will take these factors into consideration in making investment decisions for the Strategy, no assurance can be given that the Strategy will be able to avoid these risks.
Property Risk - The valuation of property is generally a matter of valuer's opinion rather than fact. The amount raised when a property is sold may be less than the valuation.
Consumer Finance - Consumer finance is a highly regulated industry subject to federal and state regulations which may limit enforceability and remedies of the Strategy’s ownership rights. Consumer finance investigations are almost never initiated at an opportune moment and often the outcomes are unpredictable and the penalties and exposure are high.
General Lending Risks - To the extent that the Strategy engages in active lending transactions, it will be subject to risks associated with possible default by the borrower, insufficient collateral and legal and other costs incurred in collecting on a defaulted loan. The collectability of the Strategy’s loans depends on its borrowers’ ability to pay, which may be negatively impacted by an economic downturn or company’s reversals. Resulting losses may include lost principal and interest, decreased cash flow and increased collection costs. In addition, active lending by the Strategy may subject it to additional regulation, as well as possible adverse tax consequences, although the Manager may seek to adopt appropriate procedures to minimize such consequences.
Prepayments - To the extent that the Strategy engages in active lending transactions, it will be subject to subject to risks associated with the prepayment of loans by borrowers. A borrower may decide to prepay all or a portion of the remaining principal amount of a loan extended by the Fund prior to the originally scheduled payments of principal. If a borrower prepays all or a portion of any such loan, the Fund will not receive all of the interest payments that it originally expected to receive in connection with such loan, and the Fund may not be able to find a similar rate of return on another investment.
This information is communicated and/or distributed by the relevant Man entity identified below (collectively the "Company") subject to the following conditions and restriction in their respective jurisdictions.
Opinions expressed are those of the author and may not be shared by all personnel of Man Group plc (‘Man’). These opinions are subject to change without notice, are for information purposes only and do not constitute an offer or invitation to make an investment in any financial instrument or in any product to which the Company and/or its affiliates provides investment advisory or any other financial services. Any organisations, financial instrument or products described in this material are mentioned for reference purposes only which should not be considered a recommendation for their purchase or sale. Neither the Company nor the authors shall be liable to any person for any action taken on the basis of the information provided. Some statements contained in this material concerning goals, strategies, outlook or other non-historical matters may be forward-looking statements and are based on current indicators and expectations. These forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update or revise any forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those contained in the statements. The Company and/or its affiliates may or may not have a position in any financial instrument mentioned and may or may not be actively trading in any such securities. Unless stated otherwise all information is provided by the Company. Past performance is not indicative of future results.
Unless stated otherwise this information is communicated by the relevant entity listed below.
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European Economic Area: Unless indicated otherwise this material is communicated in the European Economic Area by Man Asset Management (Ireland) Limited (‘MAMIL’) which is registered in Ireland under company number 250493 and has its registered office at 70 Sir John Rogerson's Quay, Grand Canal Dock, Dublin 2, Ireland. MAMIL is authorised and regulated by the Central Bank of Ireland under number C22513.
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- For Financial Service Providers (as defined in Art. 3 d. of FINSA, which are not Clients): Man Investments AG, Huobstrasse 3, 8808 Pfäffikon SZ, Switzerland, which is regulated by FINMA.
United Kingdom: Unless indicated otherwise this material is communicated in the United Kingdom by Man Solutions Limited ('MSL') which is a private limited company registered in England and Wales under number 3385362. MSL is authorised and regulated by the UK Financial Conduct Authority (the 'FCA') under number 185637 and has its registered office at Riverbank House, 2 Swan Lane, London, EC4R 3AD, United Kingdom.
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