Can someone explain the difference between middle market lenders such as Antares, Golub, NXT and insurance companies (Prudential, Met Life)? Both types of lenders fund similar transactions and I am having difficulty distinguishing between the two.
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Well the first part is distinguishing where the money comes from, lenders such as Antares and Golub have LP’s that provide their capital to lenders to invest on their behalf to earn a subsequent risk-adjusted yield. In that regard they are earning management fees from LP’s as well as incentive fees for surprassing the hurdle rate, albeit lower than that of PE. Other firms such as Prudential are directly investing money from life insurance, retirement, etc premiums and have a separate arm doing that investing. Both compete regularly for the same deals but direct lenders have a bit more flexibility when structuring deals and can oftentimes offer better packages. Direct lenders are basically filling the gap for deals that do not meet the threshold for bank lending because of risk, size, and the like and consequently are seen as alternative investments.
It sounds like they both do very similar work with the main difference being where the capital comes from. Is there any difference between the amount of loans that these companies syndicate or length of hold period? Also, in your opinion do you think working at a company like Antares would be a better learning experience than working at a private investment arm of an insurance company?
It’s obviously dependent on the shop with regards to hold size, a lot of direct lenders offer one stop financing solutions. Golub, Ares, Antares, and Owl Rock, some of the largest players in the space can hold the whole chunk of the debt or can choose to syndicate it out if they don’t want all the exposure and be an agent on the deal, which usually results in greater fee economics for the agent. The holding period is on average 5 years for direct lenders so i think it’d be very similar for both types of lenders. I would say that working at a Golub or Antares would offer more flexibility, however both jobs would be very very similar if not the same. Moreso for brand name, I’d rather have Antares on my resume than Prudential. Not to say Prudential isn’t great, but Antares is highly respected in the space.
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