In a world where institutional investors are looking to do more with fewer managers and public and private markets are converging, "Barings is always on the lookout for deals," CEO and Chairman Michael Freno says.
In an interview with Pensions & Investments, Freno said “public and private markets continue to converge” and “we’re well-equipped to be in both markets to capture the relative value that can shift quickly between the two.”
That said, Freno noted Barings remains open to further acquisitions to build out its businesses.
Pension funds and other institutional clients increasingly want to work with fewer investment firms, consolidating the number they work with, he said. “Institutional investors are consolidating their strategic relationships with managers, partnering with fewer managers that offer more capabilities, and we are also a beneficiary of that trend.”
In 2022, Barings completed its purchase of Australian real estate manager Altis Property Group, and currently “we’re looking at private markets,” he added.
Freno says the firm is fully committed to private credit, an industry that globally hit $3 trillion in assets late last year, according to the Alternative Credit Council.
In terms of Barings’ private credit AUM growth, the firm managed $129.5 billion as of year-end 2024, compared with $99.25 billion in 2023, he said.
“Overall it is going to continue to grow. It’s been a big market for years. Insurers have been active in private credit for a long time. It’s now more prevalent with other insurers and institutions. We’re seeing a shift from the public market to the private market, for ease of execution and certainty of execution.”
Freno's openness to acquisitions comes after the private credit world was roiled about a year ago by news that Corinthia Global Management — an investment platform backed by investment giant Nomura — poached a number of top executives from Barings' private credit division. Ian Fowler and Adam Wheeler, who were co-heads of the global private finance team at Barings, were among them. Barings hit back with a lawsuit, describing Corinthia’s actions as “one of the largest corporate raids at an asset manager in years.”
Litigation between the two firms is continuing, a spokesperson for the firm said.
Meanwhile, Barings won some pension fund mandates last year, including from Australia’s A$170 billion ($105 billion) Aware Super, the $8.9 billion Philadelphia Public Employees Retirement System and $2.6 billion Anne Arundel County Retirement and Pension System, according to Pensions & Investments data. Anne Arundel's mandate was in high yield fixed income; Australia awarded Barings a real estate mandate, and Philadelphia's mandate was in diversified alternative equity.
One international pension fund that has invested with Barings in collateralized loan obligations/structured credit for over 15 years has in the last few years more than tripled its allocation to Barings, adding a real estate equity mandate and global high yield bonds, according to a source familiar with the firm.
Barings had $421 billion in assets as of Dec. 31, with roughly 75% of that in public and private fixed income, and the remainder in real assets, including infrastructure and real estate, and in what the firm calls capital solutions — essentially, financing any kind of lending to asset managers. That’s up $40 billion from the year-end 2023. Private credit includes global private finance/direct lending, infrastructure debt, equipment finance, corporate private placements, and global private structured finance.
Freno, a longtime executive at the firm, is also chair of the Barings board of directors. He was named CEO in 2020. Previous positions include serving as president and head of global markets at the firm, which is owned by the insurance giant MassMutual. In 2016, MassMutual joined Babson Capital Management with three other firms it owned, one of which was a former unit of the Barings Asset Management, to create a new Barings. The combination created one of the largest investment management firms in the U.S. The combined institution operates out of its Charlotte, N.C., headquarters.
CLOs are a growth area for Barings, Freno said.
Recently, the firm completed its first private credit CLO deal in Europe “that fits nicely into our CLO complex. We’ve done 12 (CLO deals) globally in 2024. We’ve got an incredibly large team, buying and managing CLO tranches for 25 years now. We can do CLOs backed by syndicated loans in Europe, U.S., and middle-market private credit and it really depends on the manager’s ability to assemble the collateral. ... Our global CLO capabilities sit across both our public and private businesses, but we’re seeing an expanding opportunity for middle-market private credit CLOs.”
Freno reiterated that this was the first private credit CLO deal in Europe for the industry — not just for Barings. Barings’ global CLO team oversees $52 billion in assets under management.
Within the universe of credit, “CLOs sit on our liquid private side,” he said. “We’re managing tranches and buying on behalf of investors,” Freno said. Barings' launch of the first-ever European middle market private credit CLO, Barings Euro Middle Market CLO, was valued at €380 million. In 2024, it represented Barings’ 12th new issue CLO. The $400 million vehicle was made up of nearly 50 senior secured, middle-market loans.
As for why private credit CLOs are experiencing such popularity now, Freno said: “In the current spread environment, private credit CLOs present an interesting and growing opportunity for long-term investors who are willing to move into a structured investment to meet and balance their risk and return investment objectives.”
On portfolio finance, he said: “We’re excited about our industry-leading portfolio finance capabilities and see a fast-growing $100 billion annual opportunity for investors to access a directly originated investment grade asset class. Our team seeks to address the funding gap caused by the growing demand for capital coming from asset managers, funds, and asset owners, while offering investors the opportunity to capitalize on the growth of this asset class, which has traditionally been dominated by banks. We have an eight-year track record in portfolio finance and believe we’re one of the largest non-bank lenders in this space.”
Portfolio finance means funding for all private markets portfolio managers, ranging from secondary portfolios, real estate, private equity and private credit managers.
