FinAlternatives, an news source for hedge funds and private equity funds, is reporting that FRM Capital Advisors, a London based hedge fund seeding firm, is making an investment in an asset-based lending (ABL) hedge fund. FRM reportedly made a $60 million investment into Victory Park Capital, a Chicago-based firm.
As I noted earlier in a story on ABL hedge funds, this a hot area for investments right now. The central advantages of an ABL hedge fund is that (1) they are not generally going to be correlated to the general equity markets and (2) most ABL hedge funds have a monthly or quarterly distribution component. This distribution of earnings can be particularly attractive to certain investors seeking current income and non-correlation to the bond and equity markets.
ABL funds are particularly attractive right now because the credit markets are drying up. Small and mid-market companies, which rely on short term financing to fund business operations, are being squeezed by lack of liquidity. Many small ABL companies and hedge funds are looking to fill this gap in the market. Many of these companies and funds have been quite successful.