Joseph Pinto, CEO of M&G Investments, spoke to IPE about his ambitions for its private markets division
The chief executive officer of M&G Investments is on a mission to speed the asset manager’s private markets business into pole position in Europe, with a focus on private credit.
Joseph Pinto took another step towards his goal late last week when M&G acquired a majority stake in P Capital Partners (PCP), a European private credit business.
M&G will acquire 70% of PCP, which has raised around €7bn since its inception in 2002.
PCP will become part of M&G’s £73bn (€87bn) private markets business, complementing its established £19bn private credit and structured credit teams and broadening its client offering in a segment where P Capital Partners already has strong relationships and an extensive origination network.
Pinto says this latest acquisition will bolster M&G’s private markets capabilities in northern European countries.
He says: “If you start with Germany, go to the UK and the whole Nordics region, it’s a huge market for us. It is also a big, big market in terms of client appetite [to invest] into direct lending in those areas.”
While M&G Investments has so far purchased 70% of P Capital, Pinto is intent on gradually ramping up its stake.
He says: “Our intention is to increase our stake for sure, [to] having a vast majority of it, while keeping a small stake for the partners of PCP.”
Pinto did not rule out the possibility of PCP eventually becoming a wholly owned subsidiary of M&G, adding that it is just “a bit long term” to say.
Pinto says M&G was able to land the PCP acquisition, in part due to its life assurance heritage, with Prudential being one of its main backers, meaning M&G has permanent access to long-term, patient capital. This brings cross-benefits to both parties, he adds.
“We want to keep reinforcing our capabilities and [PCP] is a very good add-on to what we do already. The first leverage we’re going to bring to them is cross-selling with our existing client base, and eventually approaching new clients where we believe there is a demand for non-sponsored financing.
“The second, let’s say, benefit, is that our life insurance client company [Prudential] will become a client and will provide permanent capital as a client of P Capital Partners.”
The PCP acquisition comes hot on the heels of M&G’s purchase of a 65% stake in value-add real estate fund manager BauMont Real Estate Capital last November.
BauMont, which has €1.5bn of assets under management will join forces with M&G Real Estate’s £40bn global real estate business, enabling M&G to expand its client proposition beyond its established core commercial, residential and debt strategies – and the ability to invest throughout the full property cycle.
Both acquisitions form part of Pinto’s master plan to grow M&G’s private markets business way beyond £73bn of AUM, to be the biggest in Europe.
The business is split into six pillars around private credit, structured credit, impact and private equity, real estate, infrastructure and ResponsAbility, which operates as an impact asset manager.
The acquisition of PCP establishes a new seventh pillar, by taking M&G’s private markets division into the corporate non-sponsor sector, which can be highly lucrative, generating returns of 12% to 15%, according to Pinto.
“We see strong demand for non-sponsored lending [where there are no banks or intermediaries]. Over the years, [in the US] the banks have stopped lending money to mid-cap companies, progressively, whereby the split now is probably 80% in the hands of long-term investors, private market players or asset managers, and 20% is still in the hands of banks. In Europe, we’re probably closer to 35% [versus] 65% in the hands of banks. This shows you the potential for private credit and non-sponsored lending.”
“Our life insurance client company [Prudential] will become a client and will provide permanent capital as a client of P Capital Partners”
Joseph Pinto, CEO of M&G Investments
Pinto’s interest in private markets is partly driven by his belief that this asset class provides an increasingly important route to achieving portfolio diversification benefits.
Despite the sector’s particularly strong growth in recent years, Pinto is confident that private market opportunities will remain attractive for years to come, “especially in private credit”.
He is also keen to broaden M&G’s international reach. “Probably the next move, if we want to be more than just a European private player, is to look at Asia in terms of product development.”
The driving force behind M&G’s ability to grow hinges on its access to capital.
Pinto says: “Over the past two, three years, fundraising became much more difficult. So the mid-size and small players felt the pain. For us, we have access to that patient and permanent capital.”
As private markets continue to evolve, a changing regulatory landscape, including the introduction of new fund structures, is helping redefine the space, he adds.
Pinto’s team is already hard at work developing a range of different products that will offer investors exposure to the diverse spectrum of this previously hard-to-access world, opening the doors for a broader client base to incorporate private assets into their portfolios – as well as enabling M&G to stay on its ambitious growth trajectory.
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