Pearl Diver Capital has announced the first close of its significant risk transfer (SRT) fund, an open-ended global internal strategy.
The Pearl Diver aquanaut fund allows institutional investors to participate in SRT and financial institution capital relief transactions of varying sizes. It currently targets $1.5bn (£1.1bn) in commitments.
According to Pearl Diver, the specialist alternatives manager will focus on corporate loan portfolios originated by banks in Europe and the UK, with plans to expand into North America and select international markets.
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“SRTs have evolved from niche bank capital tools into a mainstream credit asset class,” said Indranil (Neil) Basu, founder and managing partner of Pearl Diver Capital. “As regulatory capital regimes tighten and banks seek to free up balance-sheet capacity, SRT partnerships are becoming central to global credit intermediation and we aim to be one of the leading independent platforms in that space.”
The fund invests through first-loss or mezzanine tranches of SRT structures.
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This builds on the growing SRT market, where banks transfer part of the credit risk of their loan portfolios to investors, helping banks reduce the amount of capital they are required to hold.
High-profile recent examples include US bank Morgan Stanley completing an SRT with Blackstone, transferring risk on its prime-brokerage margin-loan book, while European banks such as Société Générale and Santander have executed over €75bn in capital-relief portfolios.
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