AIG invests $1.5bn in asset manager

US insurer AIG has partnered with private equity firm Oak Hill Capital Management to launch an asset manager focused on direct lending to middle markets.

The asset manager, Varagon Capital Partners, is headquartered in New York and launches with an initial $1.5 billion investment commitment from AIG.

The venture is led by Varagon’s chief executive officer (CEO), Walter Owens. Prior to his time at Varagon, Owens held leadership positions at GE Capital, CIT Group, and TD Bank.

Varagon will offer first-lien, unitranche and second-lien loans, as well as mezzanine financing, to companies with $10 million to $75 million of EBITDA. It will target leveraged finance opportunities of up to $350 million and has a typical hold size of $20 million to $100 million.

Owens said: “Varagon’s versatile product suite creates a ‘one-stop’ financing solution for borrowers. Varagon’s investors have a broad appetite for attractive risk-adjusted returns, allowing Varagon to offer competitive financing solutions up and down the capital structure.”

Denis Nayden, a managing partner of Oak Hill and former chairman and CEO of GE Capital, serves as the chairman of Varagon’s board of directors.

Varagon’s board also includes independent directors with significant industry expertise. Michael Gaudino, former CEO of GE Corporate Financial Services, and Morris Offit, chairman of Offit Capital, both serve on Varagon’s board of directors.

Nayden said: “Varagon developed from our belief that there is an opportunity to better serve both borrowers and investors in the middle market. Varagon offers investors a superior means to invest in middle market credit, providing highly attractive risk-adjusted returns through tailored, transparent investment solutions.”

Brian Schreiber, deputy chief investment officer of AIG and a member of Varagon’s board of directors, said: “We are excited about the opportunity to partner with Varagon. As a long-term investor, AIG is drawn to the strong fundamentals of the middle market opportunity. Varagon offers sophisticated investors clear, attractive, and flexible exposure to high quality, directly-originated assets with best-in-class risk management.”