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If you intended to raise half a billion dollars to invest in, among other things, private credit, this is hardly the ideal time.
The asset class is in the headlines daily as the regulator cranks up its crusade on valuations while some of the largest domestic and international operators have had to freeze their funds as investors lined up to withdraw their cash.
But that’s not stopping Hearts & Minds Investments, the fund management arm tied to the popular charity investment conference, from rattling the can for only the second time in its 10-year history for a new credit-related fund.
Its latest offering is the Hearts & Minds Global Credit Fund, or HM2, which is seeking to raise between $500 million and $700 million from wholesale investors to allocate to six credit managers across eight funds, of which at least half can be categorised as private credit.
“We’re well aware of many of the things which are troubling the Australian brand of private credit at the moment,” Hearts & Minds Investments chief executive Richard Howes tells The Australian Financial Review. “We’re steering well clear of these issues in the way we’re assembling the fund.”
Howes, the former chief executive of ASX-listed annuities giant Challenger, is keen to point out that these eight funds are weighted towards the US and include so-called “opportunities strategies” run by hedge fund legends Michael Hintze and Dan Loeb, which give them discretion to invest wherever they spot value.
In fact, Howes points out that Hintze appeared at the 2025 Sohn Hearts & Minds conference at Sydney’s Opera House, expressing his concerns about private credit, which should give prospective investors comfort that this is not a set-and-forget strategy.
There’s every chance private credit will once again be a hot topic at the 10th Sohn Hearts & Minds Investment conference to be held in Queenstown, New Zealand next month as the sharpest minds in the industry assemble to work out where the world is going, and which stocks are best to bet on.
Howes says that, when it comes to credit, he wants to hedge his bets and has allocated to funds with exposure to corporate lending, asset-backed lending and active opportunism within global credit.
Specifically, the asset managers who have committed to manage up to $75 million for the fund include global private credit titan Barings, Dan Loeb’s Third Point, private equity giant KKR’s asset-backed fund, Todd Boehly’s Eldridge, Sir Michael Hintze’s Deltroit Opportunities Fund and Australian private credit fund Revolution, which was founded in 2018 by Bob Sahota, another Challenger alumnus.
The target return is 10 per cent after fees and donations in the form of income and capital appreciation, with an initial running yield marketed at 8 per cent.
Howes says that the credit fund aligns with his experience that there is a need among investors to replace phased-out Australian bank hybrids, as well as demand for yielding assets in the retirement and private wealth sector.
Distributions will be paid quarterly while subscriptions and redemptions will also occur quarterly, although agreed capacity limits with each strategy mean that if the fund were to grow meaningfully, it would require the addition of another manager.
While the fund will be unlisted and available only to wholesale investors, it will have a similar charitable fee structure to the ASX-listed global equities fund HM1 in that the managers will waive their management fees.
This allows for 1 per cent of the net asset value to be distributed to charities associated with medical research. The overall donation is equivalent to half the cost of accessing these exclusive funds directly.
Should the raising reach its target, it will contribute between $5 million and $7 million of annual distributions to a range of medical charities so long as the fund is in operation.
The Global Credit Fund is the second fund to be launched by Hearts & Minds after its high-profile listed investment company HM1 floated in November 2018.
That equities fund, which has $775 million of assets under management, has been a major contributor to the near $100 million of distributions paid to several medical research charities since the first Sohn Hearts & Minds gathering was held a decade ago. That includes $11.4 million of payments made by HM1 in the 2026 financial year alone.
However, the experience for investors has been mixed. The HM1 units currently trade at a discount to net asset value of around 14 per cent, which is around the five-year average discount, while underlying performance has ranked 12th of the 13 global equities listed investment company peers over that period. The fund was also caught in two ASX-listed stocks – Corporate Travel Management and Opthea – that were forced to be written down to zero. Howes says that the board’s priority remains narrowing the discount to net asset value of HM1, and he flagged further initiatives on that front.
The credit fund is an opportunity to broaden the Hearts and Minds platform. “That means more funds across more asset classes to scale up our giving,” Howes says.
The Australian Financial Review is a media partner of Sohn Hearts & Minds.
This article was originally posted by The Australian Financial Review here. Licensed by Copyright Agency. You must not copy this work without permission.
