Sciens and PVE seek value in Italian NPLs

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Sciens Alternative Investments and PVE Capital have taken an interest in Italian NPLs with the launch of a closed ended fund – PVE European Distressed Fund I.

Sciens Alternative Investments and PVE Capital, located in New York and London, have announced their second recent joint venture that is focused on Italian non-performing loans.

The PVE European Distressed Fund I is a closed ended fund that has invested in a portfolio of Italian non-performing loans (NPLs) with a gross book value of €408m, primarily composed of secured loans backed by Italian real estate. It is an Irish unit trust which has allowed a broad array of institutional investors to gain exposure to this investment opportunity.

Sciens is the fund manager for the PVE European Distressed Fund I. PVE Capital, which manages some $1bn (€912m) across six credit strategies, is the originator of this deal, as well as being the asset manager of the NPL portfolio.

The venture follows an existing European structured credit managed account, SGAS Pearl Vega which was launched in September 2014 on Sciens’ independent managed account platform and follows the PVE Special Situations Credit Strategy.

Sciens Capital opened up for business in New York in the early 1990s as a private equity company and then developed as an asset manager in early 2000, when it launched its first fund of funds. It then crossed the Atlantic with the acquisition of a fund of funds manager, Atlas Capital Limited, in London, and entered the hedge fund space.

“We started to make investments across the liquidity sector and as a result of this we bought a managed account business from Partners Group in Switzerland,” Roberto Botero, director of Global Advisory, explains.

In 2013, Europe began to look interesting for Sciens as it became clear that a resolution of the European sovereign debt crisis, supported by the European Central Bank, was necessary.

“Since 2010, we were able to make high returns from credit specialists in the US as a result of the Fed’s QE and we then saw a similar opportunity in Europe in 2013,” Botero says.

However, Europe is not the US and assessing the timing of the quantitative easing actually happening proved to be a bit more of a challenge. As Sciens started to move across the credit and private equity space in Europe, the wait paid off.

“We first looked at credit and equity and PVE was our first partnership thanks to the relationship we already had with Gennaro Pucci, CIO and founder of PVE,” Botero explains.

In general, Sciens is on the hunt for accounts and special mandates where they can partner for effective investment strategies. While Sciens invests in a wide spectrum of hedge fund strategies, NPLs are of particular interest. In Europe, the Italian NPL market is the most interesting.

“Italian banks are now in a position to free their balance sheets of NPLs as a result of the QE programme in Europe. Now that there is support for the banks it makes more sense,” Botero explains.

Botero stressed that: “The Italian NPLs have been the best to look at over the past year as the government managed to implement sufficient reforms to push lenders to liberate those assets.”

“It still takes quite a long time to go through a judicial process in Italy, but it looks like the reforms are working in the right way, which makes us confident to keep looking at the country for future investments,” he says.

Although Italy is proving to be a good market for Sciens, the Italian regulations have not been easy to work with.

“We did have a bit of a hard time with this transaction, finding how to allow an offshore investor to participate in the credit investments. We therefore decided to create an AIFMD compliant platform,” Botero recounts.

Finally, asked whether they are assessing other NPL markets across Europe, Botero said: “Most of the opportunities in Spain have already gone but the quality of assets against collateral is not as good as in Italy – at least in the sectors we are reviewing.”


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