This publication looks at another firm with strong US linkages that operates in the area that might loosely be dubbed "private credit", tapping into unmet demand for credit at a time when conventional banks remain under pressure.

The expanding world of non-bank credit is proving to be a happy hunting ground for TCA Fund Management Group, a specialist advisory and finance firm based in the UK and US that has recently announced the launch of a small-cap private equity fund. TCA has had a fresh look at the segment of companies it has been working with, Bob Press, founding partner, told this news service recently.  Among players in the private credit field that have been interviewed by this publication are Firebreak Capital (founded by former figures at Goldman Sachs), and BroadRiver Asset Management, TCA is eager to continue tapping the trend for non-bank credit. There remains a flurry of interest around the world of private credit; at a recent Family Wealth Report conference in New York, the term “private credit” surfaced repeatedly as an asset class garnering interest from the likes of family offices and wealthy individual clients seeking yield and diversification.

In June, TCA said it intended to launch a small-cap private equity fund to invest in what it says are under-served growth stage companies, primarily in the US and UK. This particular fund is called TCA Opportunities Fund I, LP and registered with the Guernsey Financial Services Commission. It aims to target a relatively small number - 15 to 30 – of companies, using a US dollar-based vehicle as well as having a US based feeder.

This news service recently caught up with Press to ask him about TCA, its view of the market and its business strategy, and the thinking behind its latest offering.

Why do you think it is an opportune time to start this fund?

The reasoning behind the launch is there are more than 28 million small businesses with revenues between $25-$150 million that do not have the required capital to persuade banks to lend, or attract the attention of peer to-peer lenders, traditional private equity and crowd-funders, according to US government data.

To fill this “forgotten middle”, TCA will use its origination platform and experience derived from its current TCA Global Credit Master Fund, to make strategic and controlling investments in the $5 to $15 million range.

“This is not a straight private equity fund but more of a hybrid between a credit business and private equity fund,” Press said. “We just started the capital raise with our own and a few existing investors,” he continued.

Who are the target investors?

The fund is being pitched to allocators such as family offices, small institutions, and high net worth individuals.

Return objectives?

The fund aims at an equity-type yield with 20 per cent-plus compound returns, he said. “TCA’s credit fund targets 8 per cent to 12 per cent net per annum to investors. This product is looking to achieve 15 per cent to 25 per cent returns with a model that differs from traditional private equity in that it is looking to have regular investor cash flows with much shorter investment periods,” he said.

What is the story of this firm in terms of growth?

TCA has grown as the private credit market is on the up. The firm had fewer than 12 employees in 2012 and today has almost 40 of them. The business is expanding with a new office in New York City, joining the London and Miami locations.  

The growth of such a business has a number of drivers, TCA’s Press said. Tth traditional bank lending crimped by tough new capital rules and regulatory burdens, non-bank, “alternatives” are filling the gaps. Data from Deloitte, the accountancy, and Alternative Credit Council (ACC), an industry group, reveal the private credit market globally has risen to $560 billion, from $440 billion in 2015. The Deloitte/ACC report found that European businesses are playing an important role in driving this growth. Most financing is going to businesses with pre-tax profits of $10 million or more. Most loans are greater than $5 million and half are in the $25 million-$100 million range. On the other hand, bond market financing, a common form of non-bank finance for larger corporates, is in the $100 million-$300 million range.