Standard Chartered has seen “material” demand from high-net-worth individuals (HNWIs) for its newly-launched European direct lending fund.

The fund was launched earlier this month in response to the rising popularity of private credit investments.

It targets privately originated loans from companies located in Western Europe that are generally controlled by private equity funds. The manager has a preference for first lien and defensive non-cyclical industries such as software, healthcare, or business services.

Read more: Signs of moderation in direct lending returns

As the fund offers partial liquidity, it also allocates to liquid issues such as leveraged loans, high yield bonds, and some cash equivalent assets.

Dany Dupasquier, group head of fund and alternative selection, wealth solutions at Standard Chartered, told Alternative Credit Investor that client interest in direct lending has been strong on the back of relatively mixed returns from public fixed income over the last five years and the continued demand for yield-enhancement solutions.

“Currently, the asset class may offer a significant yield-premium over US private credit – about 100-150bps premium in credit spread,”  Dupasquier said.

Read more: Ares direct lending fund attracts €2.2bn from wealth market

“The additional spread is not necessarily from the mixed macroeconomic conditions in Europe, but instead from a more favourable demand-supply dynamic that drives not only better economic terms for lenders, but also stronger credit protections.

“We already see material demand from our HNWI clients. Many investors welcome this new income solution that can complement existing exposures to US direct lending.”

Dupasquier added that while Standard Chartered is focusing on this new fund in the short term, the team “may consider add another solution that can be accretive to our offer” in the future.

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