Voya Investment Management (Voya IM), the asset management business of Voya Financial, Inc. (NYSE: VOYA), announced today that it committed $4.6 billion of debt across private placement investments in 2020. This included $3.5 billion of debt invested on behalf of institutional clients.
“With more than $85 billion issued in the private placement market, we remained disciplined investors and only participated where credit risk, structure and pricing met our standards,” said Chris Lyons, head of Private Credit, Voya IM.
Voya IM has seen significant growth in its external client base over the last five years, with institutional clients now representing 56% of Voya IM’s total $21.5 billion of private placement assets under management (AUM).
“Other companies operating in the private placement space don’t have the luxury of selectivity because they have such large target levels of production to fill each year as a result of heavy demand from their General Accounts. We purposefully limit the size of our overall annual investment needs so we can focus only on transactions that exhibit superior risk/return characteristics. This aligns us with the interests of our clients and is a feature of our platform that really resonates with institutional investors,” Lyons continued.
As a result of the COVID-19 market dislocation in March, private placements’ spread premium over similarly rated public corporate debt soared to the highest level in the last 10 years. This provided an attractive entry point for institutional investors looking to increase existing allocations or allocate to the space for the first time. While the team expects that private placement spreads will revert back towards the mean in 2021, it believes that spread levels will remain elevated versus their long-term average.
“We partner with our clients to help them really understand the space and how an allocation to private placements fits in relation to the broader context of their portfolio. We believe that the growth of our private placement client base has been driven by not only our performance, but also our commitment to excellent client service. Every client is a reference and that is something we will make sure continues as our client base grows,” said Voya’s Virginia O’Kelley, private credit portfolio manager.
Going forward, Voya IM expects that infrastructure project financing will continue to represent a larger portion of its overall private credit business. Infrastructure debt was $1.4 billion, or 30.4%, of Voya IM’s total amount committed and funded in 2020.
Voya IM recently hired a team focused on the origination, underwriting, structuring and management of mezzanine opportunities in renewable energy infrastructure projects. In June 2020, the team closed its first deal, an agreement to provide $30 million in debt financing to Bakersfield Renewable Fuels to help retrofit a crude oil refinery to produce diesel from soybean oil and other plant-based feedstock.
“The addition of our renewable energy project financing team is an excellent complement to Voya’s three decades of diversified infrastructure lending. To continue to grow, we need to listen to our clients. ESG is becoming increasingly important to clients and we believe mezzanine debt investments in renewable energy projects represent one of the most attractive ways to gain ESG exposure,” said Lyons.
About Voya Investment Management
A leading active asset management firm, Voya Investment Management manages, as of Dec. 31, 2020, more than $245 billion for affiliated and external institutions as well as individual investors. With over 40 years of history in asset management, Voya Investment Management has the experience and resources to provide clients with investment solutions with an emphasis on equities, fixed income, and multi-asset strategies and solutions. Voya Investment Management was named in 2015, 2016, 2017, 2018, 2019 and 2020 as a “Best Places to Work” by Pensions & Investments magazine. For more information, visit voyainvestments.com. Follow Voya Investment Management on Twitter @VoyaInvestments.