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Digital Subscriptions > The Hedge Fund Journal > Issue 140 – Apr | May 2019 > BNP Paribas CP European Special Opps Debt Fund

BNP Paribas CP European Special Opps Debt Fund

Ferreting out niche managers

The genesis for launching European Special Opportunities was what many asset managers would call a “reverse enquiry” but this term does not really make sense in the context of the BNP Paribas Capital Partners (BNPP CP) business model, since customised, client-led initiatives are the normal modus operandi. BNPP CP’s manager selection prowess runs the gamut from liquid alternatives such as UCITS to real estate, private equity and alternative credit, with EUR 7 billion under management, advisory and administration. In 2013, an insurance client requested a dedicated mandate to focus on European private debt opportunities. Its performance has exceeded expectations, which is one reason why BNPP CP is now offering a similar strategy to other institutional, family office and high net worth investors.

The much-maligned multi-manager business model makes sense for “hard” and “soft” reasons. “The ability to syndicate demand from multiple investors lets us access share classes that offer lower fees. Typical fee savings approximately offset our own fees, which average 0.20% of committed capital over an expected seven-year period of investment and harvesting,” says BNPP CP CEO, Gilles Guerin.

But the real saving for some allocators can be measured in terms of the internal resources needed to source, due diligence and monitor funds, and handle administration. BNPP CP has teams to carry out extensive on-site due diligence, with very detailed reports and internal scoring for investment and operational risks in each selected fund. Investors could also receive as much communication and transparency as if they invested directly: sight of underlying funds’ positions and receive quarterly reporting, commenting on deal low, events, portfolio allocations, and NAVs. BNPP CP is well placed to cater for insurers, whose solvency Capital Requirements under Solvency II are reduced by reporting each underlying fund’s portfolio through an AMPERE matrix breakdown, supervised by EY. BNPP CP’s experience in private equity fund administration helps with asset/liability management and monitoring cash calls, which are usually synchronised with those from investee funds. Another advantage of a multi-manager model for drawdown fund structures is netting: where distributions from underlying funds can be offset against capital calls this may reduce or relieve investors’ need to stump up cash during some periods. ESO is a closed-end fund structure, and a Luxembourg RAIF (Reserved Alternative Investment Fund).

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