Hayfin today announces the successful close of Hayfin Direct Lending Fund V (“DLF V”), having attracted capital in excess of €15 billion, significantly exceeding its target for the fundraise. The fundraise comprises the commingled Hayfin Direct Lending Fund V, which has reached a final close, together with related investment vehicles. At the time of the close, DLF V had already deployed more than 50% of commitments across over 35 companies. 

Through its Direct Lending strategy, Hayfin sources, structures and invests in performing senior‑secured loans to primarily European middle‑market and upper‑middle‑market businesses, with an emphasis on downside protection and robust cash flow generation or asset coverage. The vast majority of these loans are originated through an extensive relationship-based primary sourcing network spanning 13 offices and dedicated sector‑specialist teams. This broad-based origination model has allowed Hayfin to build a diverse portfolio of loans to a wide range of cash‑generative businesses, with minimal exposure to software credits deemed most susceptible to AI disruption. Hayfin invested a record €7.1 billion into Direct Lending transactions in the last twelve months, bringing total strategy deployment to over €38 billion across more than 350 investments since the firm’s inception. 

The fundraise attracted capital commitments exclusively from a global institutional investor base, comprising public and private pension funds, financial institutions, insurance companies, sovereign wealth funds, funds of funds, endowments, consultants and family offices. Recent strains within semi-liquid US private credit funds for retail investors have accelerated LP demand for conservative fund structures, in line with Hayfin’s approach of securing locked-up capital in closed-ended drawdown and institutional evergreen vehicles. This helped Hayfin to achieve the most significant milestone yet for its flagship private credit strategy with the successful close of Direct Lending Fund V, more than doubling the amount raised for Direct Lending Fund IV, which closed in August 2023 with over €6bn in total commitments.  

The DLF V fundraise also includes the successful close of a rated note feeder which contributed approximately $600 million of total investable capital. The structure, advised on by Proskauer as Legal Counsel, provides insurers with capital-efficient access to Hayfin’s European Direct Lending strategy, reflecting the firm’s commitment to broadening access to its private credit platform across a diverse range of institutional investor types. 

Mark Tognolini, Co-Chief Executive Officer and Co‑Founder of Hayfin, commented: “We are very pleased with the successful close of Direct Lending Fund V and grateful for the strong support from both new and long‑standing investors. At a time when parts of the private credit market are experiencing heightened volatility, this fundraise reflects confidence in our disciplined underwriting, our highly specialised team, our conservative approach to fund structuring and our differentiated origination model, which has been built to perform consistently across market cycles. 

“In recent months, longstanding differences between the US and European private credit markets have become even more pronounced, with European lenders continuing to benefit from greater market fragmentation, continued bank retrenchment and a predominantly institutional capital base. Against this backdrop, we are well placed to take further market share and support high‑quality European businesses with flexible financing solutions – as we have consistently done in other periods of volatility – while preserving our focus on capital preservation and downside protection.” 

Hayfin was advised on the fundraise by Macfarlanes. 

Since it was founded in 2009, Hayfin has invested over €55bn of capital across more than 500 portfolio companies via its private credit strategies. 

When preparing to host Hayfin’s North American clients at our annual US AGM in New York last month, we knew three topics would be at the forefront of their thinking: software, retail redemptions and the Iran conflict. The discussion became a timely test of how private credit managers can demonstrate that they are the right partners to help investors navigate market volatility.

New AI models have triggered a repricing of business durability in the face of accelerating disruption, prompting LPs to examine their GPs’ exposure to potential losses in software, where private credit is often seen as heavily concentrated. At the same time, a surge in redemptions and gating in some US semi-liquid private credit vehicles has forced price discovery and raised the prospect of supply shocks. Finally, despite the fragile ceasefire reached in April, tensions in the Middle East continue to ripple through supply chains, commodities pricing and energy markets.

These three trends are playing out differently on either side of the Atlantic. In the case of the first two, the impact should in theory be more muted in Europe. Software is a smaller part of European lending than in the US, where it accounts for an estimated 20–25% of private credit activity. In Europe, higher-risk ARR lending to pre-profit software businesses with unclear paths to deleveraging is far less prevalent. Similarly, while retail capital has grown to 20–25% of global private credit AUM, withdrawals have been concentrated in US Business Development Company (BDC) and interval fund structures rather than in European vehicles, which are still relatively nascent.

But Europe is unquestionably more exposed to geopolitical risk – at least from the specific perspective of disruptions to energy supply and the resulting increase in inflation.

Is your money safe?

In all three cases, the first question that LPs should be asking their private credit managers is how they will preserve capital, protect value and limit downside risk within their existing portfolios.

We have previously explained why we remain underweight software across both our Private Credit and High-Yield & Syndicated Loans businesses. Our software exposure across Direct Lending portfolios is less than 6%, and below 5% in our latest vintage, which compares favourably with peers.

We have managed that exposure through prudent portfolio diversification and a clear view that software is not only potentially vulnerable to generative AI disruption, but also one of the most competitive parts of the market. Where we are invested, those loans are to large, mature, high-growth companies backed by sector specialist GPs. We have grounded our credit judgment in traditional credit metrics rather than uncertain enterprise value assumptions.

Uncertainty is not an environment we are waiting to pass. It is the environment we are built for.

We are similarly well placed on liquidity. Hayfin’s private credit strategies rely exclusively on fully locked-up institutional drawdown funds, with no retail capital. We had already been seeing growing demand for institutional vintage solutions that operate as drawdown vehicles, with redemptions achieved through natural portfolio run-off rather than forced asset sales. That trend now looks set to accelerate.

No manager, least of all one investing in Europe, can be fully insulated from the effects of conflict involving Iran. We saw during Covid and in the early stages of the war in Ukraine how shocks to energy, transport and agricultural supply chains can quickly spread through interconnected markets. Higher energy, fertiliser and freight costs would feed into food prices and create broader inflationary pressure.

Our dedicated Maritime team, with 15 industry specialists, more than $4 billion deployed and over 100 vessels acquired, gives us added insight into how global supply chains are being affected.

Where can managers create an edge?

The second question LPs should ask their GPs is how they are positioned to capitalise on these market dislocations. Throughout Hayfin’s history, periods like these have created the conditions for us to grow, gain market share, deepen relationships with borrowers and LPs, and deliver some of our best-performing investment vintages. Uncertainty is not an environment we are waiting to pass. It is the environment we are built for.

The obvious counterargument is that the private credit industry as a whole tends to gain market share from banks and syndicated markets during periods of disruption. The more important question, then, is what positions us to deliver compelling investment returns in a more uncertain environment relative to our competitors.

Our European focus is certainly an advantage. We consider ourselves the European home team, with 17 years of track record and a platform built to operate across fragmented jurisdictions, languages and legal regimes. The distinctive, longstanding opportunity set in Europe, as we have previously discussed, certainly still applies. There remains room for further growth, with the UK and EU’s combined GDP totaling 90% of the US, but with private markets just one third of the size. Additionally, as a shallower market than the US, Europe can reprice quicker in environments like this.

Hayfin’s adaptability and ‘one-firm’ culture, both of which I described earlier this year, are also well-suited for the current landscape. Our broad set of complementary strategies allows us to finance both growth and stress, and to lean into the parts of the market offering the best risk-adjusted returns, as this rapidly shifts around us. By operating in a de-siloed, integrated manner, when markets “flash amber”, we draw on the insights and experience of the whole team to re‑underwrite portfolios, reassess risks and recalibrate pipelines.

Recent market stresses will also affect future investment vintages. One potential second‑order effect of the recent strains in US private credit is that both LPs and borrowers will increasingly favour managers with more conservative approaches to fund structuring. US lenders might pull back from European markets, tipping competitive dynamics in favour of homegrown European managers with more institutional capital.

Patient capital – at scale

Many of the themes discussed here are only beginning to play out. We will remain patient, focusing first on supporting our existing borrowers as the market comes to us.

At the same time, we are preparing to invest selectively through our Tactical Solutions, Special Opportunities and Private Equity Solutions strategies. In these areas, choppier markets and a rising tide of €300 billion in net asset value without sponsor capital support are likely to drive demand for hybrid liquidity solutions.

With a significant undrawn capital position of c. €7bn today, we have the scale and firepower to capitalise on the opportunities that may present themselves in the months ahead.

Hayfin today announced that it has entered into a strategic partnership with Samsung Life Insurance (“Samsung Life”). As part of this planned initiative, Samsung Life will acquire a minority stake in Hayfin from Arctos Partners (“Arctos”), a move jointly structured by Arctos and Hayfin to broaden Hayfin’s institutional shareholder base. 

The transaction builds on Hayfin’s recently announced strategic partnership with Mubadala Investment Company (“Mubadala”) and AXA IM Prime, a business unit of AXA IM – part of the BNP Paribas Group (“AXA IM Prime”) – which saw Mubadala and AXA IM Prime each acquire a minority interest in Hayfin. Like Mubadala and AXA IM Prime, Samsung Life will support Hayfin’s investment strategies in tandem with becoming a minority shareholder. The transaction further strengthens Hayfin’s footprint in South Korea, reaffirming its commitment to clients in the region.  

The addition of a third new institutional minority shareholder represents the next stage in a coordinated post-management buyout (“MBO”) plan led by Hayfin and Arctos, with Arctos continuing to provide long-term strategic support through its Keystone platform, which provides bespoke growth capital and liquidity solutions to leading financial sponsors. The resulting shareholding has enabled the Hayfin team to become majority owners of the firm’s common equity. Completion remains subject to customary regulatory approvals. 

Tim Flynn, Co-Founder and Co-Chief Executive Officer at Hayfin, said: “This strategic partnership with Samsung Life is another strong endorsement of the franchise we have built. It completes our plan to bolster Hayfin’s shareholder base post-MBO through the addition of best-in-class institutions from across the globe onto our platform. Through establishing this partnership with Samsung, we look forward to deepening our commitment to the South Korean market, where we see investor demand for investment strategies continuing to grow.” 

Joonkyu Park, CIO of Samsung Life Insurance, said: “We are very excited to partner with Hayfin, a recognised leader in the European market, and this strategic partnership will play a vital role in the growth and global expansion of Samsung Life’s asset management business. Hayfin has built an excellent long-term historic investment track record and will continue to provide a broad array of attractive investment opportunities, further strengthening our focus on the private capital market. We look forward to supporting Hayfin’s ongoing growth alongside Arctos, Mubadala, and AXA IM Prime.”  

Hayfin today announced it has entered into strategic partnerships with Mubadala Investment Company (“Mubadala”) and AXA IM Prime, a business unit of AXA IM – part of BNP Paribas Group (“AXA IM Prime”), on behalf of one of its investment funds. As part of the agreement, each firm will acquire a minority interest from Arctos Partners (“Arctos”) in Hayfin and leverage their capabilities and expertise to support Hayfin’s investment strategies.

The transaction builds on the partnership between Hayfin and private investment firm Arctos. In February, Hayfin completed a management buyout (“MBO”) supported by Arctos via its Keystone strategy, which provides strategic partnerships to leading financial sponsors, through bespoke growth capital and liquidity solutions. The transaction facilitated the Hayfin team becoming majority owners of the firm’s common equity.

To enhance the MBO, Hayfin and Arctos jointly sought to distribute a portion of the firm’s institutional ownership to additional strategic minority shareholders. Mubadala and AXA IM Prime, alongside Arctos, will support the continued growth of Hayfin to further deliver on the firm’s long-term objectives of greater team ownership, alignment and incentivisation.

Hayfin will remain focused on generating superior and consistent risk-adjusted returns for its clients. As with the Arctos-backed buyout, the transaction will lead to no changes in Hayfin’s strategy, investment process, leadership or day-to-day operations. Completion remains subject to customary regulatory approvals.

Tim Flynn, Co-Founder and Co-Chief Executive Officer at Hayfin, said: “This is another landmark step, building on our partnership with Arctos, in what is an exciting new chapter for Hayfin. We are thrilled to welcome two best-in-class long-term partners in Mubadala and AXA IM Prime, each of whom represent strong endorsements of the platform we have built at Hayfin. Mubadala and AXA IM Prime bring unique perspectives and resources from around the globe that will support Hayfin’s ongoing growth and delivery of value for our clients, investors, borrowers and sponsors.”

“We are excited to partner with Hayfin as they embark on this new chapter of growth,” added Omar Eraiqaat, Deputy CEO of the Credit and Special Situations platform at Mubadala. “Their track record, investment discipline, and shared values with Mubadala make them an ideal fit for our long-term capital. This partnership reflects our conviction in Hayfin’s platform and leadership team and reinforces our strategy of backing high-quality asset managers that deliver value to all their stakeholders.”

Gilles Dusaintpère, Head of AXA IM Prime GP Stake investments at AXA IM said: “We are proud and excited to partner with Hayfin and to enhance our existing relationship. We fully endorse Hayfin’s development and long-term objectives of greater team ownership, alignment and incentivisation. Our investment strategy is designed to partner and align with best-in-class private markets players, and we look forward to supporting Hayfin and its team alongside Mubadala and Arctos.”

Hayfin has appointed Raj Paranandi as Chief Operating Officer (COO), based at the firm’s London headquarters. 

Raj joins Hayfin from MarketAxess, an international financial technology company that operates the leading electronic trading platform for institutional credit markets, where he served as COO of EMEA and APAC. Prior to this, Raj spent 10 years in leadership positions at UBS and he comes with over 25 years of experience in Financial Services. 

As COO, Raj will succeed Mark Tognolini, who will assume the role of co-Chief Executive Officer alongside Tim Flynn. This evolution in leadership reflects the collaborative management style that Mark and Tim have maintained since co-founding Hayfin and is designed to further strengthen the firm’s ability to serve its investors, borrowers, and partners. 

Raj Paranandi, COO of Hayfin, said: “I am excited to be joining Hayfin as the firm continues to experience strong growth. With a deep origination network and unparalleled connections across the European market, the firm has established an enviable track record. I look forward to building on this as the business continues to scale, attracts talent and deepens its market footprint.” 

Tim Flynn, co-CEO of Hayfin, said: “Mark and I are delighted to welcome Raj as COO of Hayfin. His deep experience and record will put the firm in great stead as we accelerate our expansion and capitalise on the growing credit opportunities for our investors.  

This is an exciting period for the business. Our partnership with Arctos and established reputation for excellence enables us to navigate market volatility and geopolitical uncertainty while positioning the firm for continued success.”  

This year looks like it might be a seminal year for private credit. The asset class continues to demonstrate secular growth – with no signs (that we can see) of reversing. At the same time, it has to navigate significant economic and political uncertainty driven by a tricky mix of rates, inflation, geopolitical uncertainty and unsustainable levels of government borrowing, particularly in the United States and the UK. 

In Europe, private credit has matured significantly. Since 2008 our asset class has become a critical component of non-investment grade financing to business across Europe – and is beginning to play a more important role in investment grade financing. It has also become an important component of portfolio construction for LPs around the world searching for downside protected, lower volatility returns.  

The question is: how will private credit perform if substantial economic headwinds materialize as the world adjusts to what appears to a changing world order? Is it the ‘golden age’ of private credit because any headwinds on the horizon will enable the better managers to prove they have in fact underwritten attractive risk adjusted returns? Or are the sceptics right who argue that in an industry that has grown very quickly, those who arrived late may be left nursing losses?  

Meanwhile, the inauguration of Donald Trump – two months on from an election which had been a key point of discussion with our LPs, sandwiched as it was between our two AGMs in London and New York – heralds potentially significant political change in the USA. The prospect of a second Trump term prompted a rally in equity markets and other asset classes but drove volatility elsewhere. While tariffs were a conspicuous omission from the new administration’s early barrage of executive orders, they remain firmly on the agenda and a reshaping of global trade patterns looks likely to remain a major theme in 2025. What might lay ahead no one can say with certainty. One thing does seem clear:  Trump’s second term in office is likely to reshape the American political landscape and disrupt convention across the globe.

However, looking at the geopolitical landscape, we’re of the opinion that turbulence should be expected, and the resulting change in market technicals will shift capital allocation decisions, impacting a range of asset classes including private credit. 

What does this mean for private credit 2025?

Despite the convulsions facing the global economy, we remain confident that both private credit as an asset class, and Hayfin as a manager in particular, are well-equipped to effectively weather these elevated levels of risk and uncertainty.

We’ve been here before during previous financial crises – most recently in COVID-19. Alternative investment managers like Hayfin are resolutely focused on mitigating risk. We’re students of the market. We bake uncertainty at its most fundamental level into our investment analysis, judiciously assessing the assets, sectors and markets in which we invest and the types of opportunities that will protect capital and yield results in the long-term.

A prerequisite to this is having the ability to originate deals and manage investments in an uncertain environment. The market has evolved significantly in the past 18 months, impacted by the resurgence of leveraged loan markets and a build-up of dry powder.

Private debt investors like Hayfin have had to respond to intensified competition and a changing opportunity set. The ability to originate a diverse range of deals gave us an important edge. The breadth of investment opportunities we can source and execute allowed us to continue deploying significant volumes of capital through our flagship Direct Lending strategy in 2024.

That is a function of how we have built our business. The same investment in our team, and in our capacity to manage a large volume of credit assets, was what enabled us to scale up our lending activity during the pandemic in 2020-21, while others were focused on managing their existing books. Sourcing deals from market niches that other lenders might overlook is also typical of our approach: when others zig, we zag. There are parallels with how we maintained discipline in terms of deployment at the outset of the supposed ‘golden age’ of 2022, when capital was readily flowing into the asset class.

And we believe our firm will go from strength to strength in 2025. Hayfin’s position as one of Europe’s leading alternative asset managers puts us in good stead to continue capitalising on opportunities for our investors.

That said, we cannot afford to rest on our laurels. It is important we continue to attract and retain our top talent to cement the strong market position that we have built over the last decade.

That is why we are so excited about our agreement with Arctos. It offers greater ownership and autonomy for our team, strategic and cultural alignment with our shareholders and ongoing capital support to fuel our continued growth. In short – more Hayfin.  

Our next chapter for growth

Amidst the geopolitical uncertainties that will characterize 2025, we are committed to our disciplined risk management approach and will remain defined by our resilience and innovation. This will enable us to continue our focus on strategic execution, as well as delivering strong and consistent returns for investors regardless of the macroeconomic environment.

This new, next chapter of our growth holds great promise for Hayfin. While the core services and expertise that have shaped and defined the business will remain at Hayfin’s heart, we have put ourselves in an exciting position to look at new opportunities to expand and evolve our existing offering. The Hayfin playbook has never been better placed to help navigate the business through future market conditions and ensure we achieve consistent and superior risk-adjusted returns for our LPs.

Our main reasons for this view, outlined in greater detail in this paper, are:

 

Why Europe? Market Considerations for Private Credit

Read the full report

Hayfin co-founder and CEO Tim Flynn was featured on Private Market Talks providing insight into the Hayfin team’s dynamic, innovative approach to direct lending and leveraged finance. Tim reflected on learnings from his career journey, from starting out as a beekeeper to founding a leading European alternative asset management firm, and how he applies the learnings from each experience to continue to enhance the Hayfin business. He also provides a view on the opportunities and challenges he sees within the private markets, and how these are informing Hayfin’s strategy.