The Evolution of Subscription Credit Facilities for Separately Managed Accounts in Europe

There has been a strong surge in recent years of large institutional investors such as state retirement plans and sovereign wealth funds making use of separately managed accounts (“SMAs”) as an investment vehicle. Tailored commercial terms and documentation have become increasingly attractive to such investors (each, an “Investor”) and, in addition, sponsors see a benefit in meeting some of their largest and most loyal Investors’ demands through the establishment of SMAs. Investments have been made with or in private equity firms, credit firms and private equity real estate firms, both in the United States and, more recently, in Europe. This has, in turn, led to an increased number of credit facilities backed by capital commitments of applicable Investors (“Subscription Credit Facilities”) being sourced and provided to SMAs.