At-a-glance
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Overview
The strategy seeks to deliver stable returns from a diversified portfolio of high-quality U.S. middle market junior debt investments (second lien term loans, mezzanine loans, PIK notes, equity co-investments) to middle market companies. We aim to offer access to high-quality, sponsor-backed U.S. middle market junior capital.
Strategy highlights
- Long-term junior capital outperformance versus opportunistic credit/special situations and high yield 1
- Middle of the balance sheet positioning with 50%+ equity cushions
- Prioritize covenant & call protection
- The fixed rate nature of junior capital locks in yield to help lower overall return volatility
- Selectivity in sourcing deals: Exclusive focus on the U.S. middle market, with 5% deal selectivity rate in 2024. Pipeline is sourced and pre-vetted by predominately top-quartile GPs
- Differentiated sourcing capabilities from our $11+ billion private equity funds strategy2
Sponsors are increasingly utilizing the flexibility of junior debt to help counter the impact of a higher interest rate environment and variable macroeconomic conditions.
U.S. MIDDLE MARKET FOCUS
Churchill targets difficult-to-access transactions in the highly attractive U.S. middle market where the firm can leverage its scale as a direct investor to generate asymmetric information advantages.
DIFFERENTIATED SOURCING ANGLE
Enhanced due diligence, earlier insights, and greater monitoring capabilities through Churchill’s 375 private equity fund commitments as well as junior capital board observer seats.
HIGH QUALITY PORTFOLIO
Churchill curates durable junior capital portfolios comprised of sponsor-backed, high quality borrowers with compelling value propositions in non-cyclical sectors
Portfolio manager
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1. Past performance does not predict or guarantee future results. None of the indices presented are benchmarks or targets for any Churchill fund or account. Indices are unmanaged and investors cannot invest in an index. Source: Cambridge Associates LLC (“CA”) benchmarking. Data as of 6/30/2024. “Junior Capital” represented by “the CA Subordinated Capital” benchmark; “Credit Opportunities/Special Situations” represented by “CA Credit Opportunities” benchmark. “High Yield” refers to the BofA Merrill Lynch U.S. High Yield BB-B Rated Index, represented on a Public Market Equivalent (PME) basis compared to CA benchmarking overall. Comparisons will differ, in some cases significantly, if the relative performance is measured over the course of a month, quarter, year or longer.
2. Includes private equity fund commitments made under the Private Equity fund strategy since 2011. Excludes venture capital and secondaries commitments. TIAA and client capital commitments to Churchill that are not yet committed to specific underlying funds are excluded. Since 2011, as of 31 Dec 2024.
