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A3 Financial starts alternative-credit fund in bet on yield hunt

[NEW YORK] A3 Financial Investments has launched a new credit fund as it sees more upside in alternative asset classes while investors globally hunt for yield.

The Denver, Colorado-based firm's Alternative Credit Fund went live on Tuesday and will be accepting investor and client assets, according to A3 Financial co-founder and partner Kimberly Merriman. The fund is targeting institutional investors, family offices and registered investment advisers, she said.

The fund launched with seed investments from four A3 principals, according to SEC filings. The group behind A3 Financial has previously raised and managed funds that had "billions of dollars in AUM (assets under management), and we're looking to do that here as well", Ms Merriman said.

Prior to founding A3, Ms Merriman was at SALT Blockchain Asset Management, along with partners Tony Bosch, Lars Soderberg, Chris Aymond and Gregg Bell. The firm allowed cryptocurrency holders to secure loans by collateralising their blockchain assets.

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According to co-founder and partner Mr Bell, the firm sees value in niche credit, including deals with smaller market cap assets, direct lending, reverse mortgages and infrastructure globally. The fund looks to gain exposure to those assets by investing portfolios in collateralized shorter duration secured loans.

"From our perspective, our focus is interest coverage, lower leverage, covenants and collateral and an alignment of interests between the lender and the borrower," Mr Bell said.

A3 sees the current environment - where investors are hunting for yield globally - as a good time to put cash to work in alternative strategies. This comes as investors pour money into alternatives like private credit, an asset classed poised to balloon to US$1 trillion in 2020.

This fund will allow investors to "access the yield and opportunity" in alternative credit in a 40 act fund structure, according to co-founder and partner Bosch. "Alternative credit has historically been mostly available through private equity and hedge fund structures," he said.