A well-regarded senior industry professional, Hodnett joins Epsilon from Maple-Brown Abbott where he was Head of Global Distribution. Prior to joining Maple-Brown Abbott in early 2020, Hodnett held senior distribution and sales roles at Pinnacle Investment Management and Eaton Vance.

Epsilon Founding Partner Joe Millward says Hodnett’s appointment reflects the heightened investor focus on the attractiveness of private credit as an asset class, with middle market direct lending being a significant and rapidly growing strategy in this category.

“Epsilon has experienced significant growth and investor interest in its middle market direct lending strategy early in its evolution.

“Continued, strong corporate borrower demand for private credit creates a significant investment opportunity for private lenders such as Epsilon and our investors. Epsilon has demonstrated its ability to finance some of Australia’s highest quality companies and support leading private equity investors as they seek funding for growth and event-driven purposes.

“In this environment, we continue to expand our team right across the firm to accommodate our growth. Corporate borrowers choose to partner with Epsilon as we provide thoughtful funding solutions with efficiency of execution and deep and ongoing engagement with our portfolio of borrowers.”

Millward adds “It is pleasing to note that we can attract a high calibre professional like Duncan to join our firm and assist in driving our strategy to be a leader in this segment of the market.

“Duncan will lead investor relations and the sales program to increase the awareness of significant investor opportunities that Epsilon presents across the spectrum of investors including private wealth advisory firms, multi-family offices, fund-of-funds, high-net-worth investors and institutional investors.”

Hodnett notes “I am delighted to be joining the team at Epsilon as the firm continues to see significant demand from both investors and borrowers. They have set-up a best in class investment and client service platform and have excellent origination capabilities which is proving attractive to investors across various channels.

“In today’s uncertain market environment, Epsilon’s strategy of targeting to deliver attractive returns whilst providing recurring income, capital preservation, low volatility in returns and low correlation to other asset classes through the cycle represents a compelling proposition.”

Epsilon launched the Epsilon Direct Lending Senior Loan Fund in June this year, underpinned by a successful two-year track record from its first fund, the Epsilon Direct lending Fund, that has seen Epsilon raise capital from a range of investors.

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Mick Wright-Smith

The sixth Intergenerational Report (IGR), recently released, maps what Australia will look like in 40 years.

The Report stated that five major forces that will shape the Australian economy over the coming decades are: ageing population, expanded use of digital and data technology, climate change and the net zero transformation, rising demand for care and support services, and increased geopolitical risk and fragmentation.

Specialist Australian middle-market corporate direct lending fund manager, Epsilon Direct Lending, says the Report provides a clear direction for future economic growth.

Epsilon co-founder Mick Wright-Smith notes “The composition of Epsilon’s current direct lending loan portfolio is reflective of the predicted shape of the Australian economy over the coming decades.

“For example, Epsilon has made capital investments into growing healthcare and data tech businesses.

“The continued transition to a services economy over the next 40 years will require investment to drive business growth in real-economy operating businesses.

“Private credit and in particular direct lending will become an increasingly important pathway for capital to drive this growth in the future services focussed economy. Businesses will continue to value funding from non-bank sources due to the speed and efficiency of dealing with private credit lenders such as us, appreciating our deep and ongoing level of engagement with portfolio of borrowers.

“Spending on aged and service pensions is projected to fall as a share of GDP despite the ageing population because we believe superannuation will increasingly fund retirement.

“Retirees will seek regular income over growth portfolios as they age. Direct Lending as an asset class provides a defensive income solution to this increasingly larger pool of retirees that will live longer,” says Wright-Smith.

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Joe Millward

Specialist Australian middle-market corporate direct lending fund manager, Epsilon Direct Lending, has launched its second fund, the Epsilon Direct Lending Senior Loan Fund.

The launch was underpinned by a successful two-year track record from its first fund, the Epsilon Direct lending Fund, that has seen Epsilon raise capital from a range of prominent investors including private wealth advisory firms, multi-family offices, fund-of-funds, high-net-worth investors and small institutional investors.

The new fund seeks to tap the growing demand from investors for Australian conservative private credit strategies that can deliver consistent cash yields, with capital preservation and low volatility, as well as returns which have a low correlation to equity markets, traditional fixed income investments and other private credit strategies such as broadly syndicated loan focused funds.

Epsilon Founding Partner Joe Millward says Epsilon’s new fund will invest alongside Epsilon’s other investment vehicles and is a direct response to the market’s appetite for an Australian private credit strategy that is differentiated and uncorrelated to other available offerings.

“For this fund, investor appetite will be met via its portfolio of directly structured and documented senior secured floating rate loans to high quality, credit-worthy Australian and New Zealand middle-market companies.

“Investors find it attractive that the fund focuses on performing companies operating in non-cyclical industries, to support growth, with no loans made to property-related financing.”

The new Fund has been launched in partnership with a cornerstone investor, a prominent Australian multi-family office.

Mick Wright-Smith, co-Founding Partner at Epsilon adds: “Inflation, high interest rates and a low GDP growth has impacted corporate cashflows, but the middle market remains resilient due to its more conservative borrowing levels and relatively lower exposure to imported inflationary drivers. Middle-market focused private equity dry powder is at high-levels with many sponsors now replenished in recent times. Our investment pipeline is as strong as ever.”

Wright-Smith says that Epsilon has a strong flow of lending opportunities to help finance some of Australia’s highest quality companies and private equity investors as they seek funding for growth and event-driven purposes. The investment team has also expanded to accommodate the funding demand.

Paul Nagy, Epsilon Co-Founding Partner adds: “The rise of private credit globally has been driven from the demand from both investors and borrowers.

“From an investor’s perspective, the opportunity to access a portfolio of well-structured lending opportunities to support the growth of quality companies as a senior secured lender is appealing.  For borrowers, it really comes down to having choice and a differentiated service proposition to the traditional bank lenders which provide the vast majority of this capital in Australia.”

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