German investment bank Yielco has announced the first closing of its new senior debt fund of funds programme.

Yielco Senior Debt II is a continuation of the firm’s senior direct lending strategy, and is aimed at risk-averse investors.

The firm also revealed that it plans to launch more private debt product initiatives in the area of specialty lending before the end of the year.

“Yielco’s first generation senior private debt fund of funds programme is already fully invested and is showing a pleasing and stable performance with a current gross yield of around 11 per cent and a loss rate of only 0.5 per cent (including unrealised losses),” said Dr Matthias Unser, founding partner and member of the executive board of Yielco.

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“Yielco Senior Debt II offers investors an alternative to liquid fixed-income securities, providing stable returns in the high single-digit range as well as strong risk protection and variable-rate loans.

“A rapid portfolio build-up with a high investment rate from as early as the fourth quarter of 2024 results in a short start-up period. In combination with the low costs, this leads to a very flat or, at best, non-existent J-curve.”

Dr Unser added that Yielco’s secondary market offers investors an increasing number of opportunities for rapid portfolio build-up and early interest distributions. The fund also offers an accumulating share class, which “ensures efficient capital deployment by automatically reinvesting capital repayments.”

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The new fund focuses on senior secured loans for lower mid-market companies. It will be built from approximately 10 fund participations, encompassing more than 300 loans, with European transactions accounting for more than 80 per cent of the portfolio.

Yielco added that it has a new specialty lending product in the private debt pipeline, and expects to announce its first closing in the fourth quarter of this year. That fund of funds will focus on private debt niche strategies with a focus on asset-based loans.

Over the next few years, Yielco plans to build up a private debt portfolio worth at least €100m (£84.24m), with a focus on direct lending.

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