[ZURICH] UBS Group is expanding a unit that lends to small and mid-sized companies in the US$890 billion private credit industry, seeking to capitalise on a group of borrowers that have been largely shut out of the flourishing public capital markets.

The O'Connor Capital Solutions unit expects to increase its number of team members to 12 by the end of this quarter, double the size from a year ago, according to co-head Rodrigo Trelles. That comes on the heels of the group investing close to US$800 million in 2020, essentially twice the amount from typical years, he said.

"This is going to be a great vintage for private credit and from a market point of view, this is the best opportunity set that we have seen since the global financial crisis," Mr Trelles said in an interview.

The team, which oversees more than US$2 billion, sees a "clear differentiation between the haves and have nots," where mid-sized businesses that have complex financing needs struggle to secure debt as banks have retreated, he said. The group is seeing appealing private credit deals in the specialty finance space, including fintech, and deals that are heavily collateralized, like real estate transactions, Mr Trelles said.

The group attributes the resilience of its portfolio - which had no material credit events including payment defaults during last year's crisis - to avoiding pockets of the market that are overcrowded, like traditional sponsor-backed buyouts, strong and tailored financial covenants and diversification. The team had six amendments in its portfolio, Mr Trelles said.

"This period was an amplification and validation of our strategy, which is find areas of the market that are for one reason or another not being well-addressed by the market more broadly," co-head Baxter Wasson said. "That's where we can provide differentiated solutions and earn returns from a risk-reward perspective that are quite attractive."

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