The transaction 

Arcmont Asset Management, a leading European private credit manager and affiliate of Nuveen, recently closed a $2.5bn continuation vehicle. one of the largest European credit secondaries transactions to date. The vehicle acquires a diversified portfolio of largely first-lien senior secured loans from Arcmont's 2019-vintage Direct Lending Fund III, giving existing LPs an accelerated liquidity option while allowing new investors to gain exposure to a seasoned senior credit portfolio.  

The FX challenge addressed

Continuation vehicles create a distinctive FX dynamic. Exiting LPs need certainty around the value they're realizing in their base currency. Incoming LPs are subscribing to a new vehicle with its own currency profile, return targets, and liquidity constraints - each group exposed to FX risk in different ways and at different points in the transaction workflow. 

Working alongside the Arcmont team, Validus: 

• Quantified the FX implications for both exiting LPs and incoming LPs across the transaction 

• Provided recommendations on the existing FX workflow, including refinements to ensure consistent treatment across both groups and an assessment of hedge infrastructure requirements and operational considerations for the new vehicle 

• Executed the FX workflow on transaction day, coordinating across counterparties and bank panels 

The work draws on Validus's specialist experience advising private credit and secondaries managers and executing over $660bn in annual hedge transactions via our tech platform, Horizon; powering trades, daily risk metrics, portfolio management and reporting. 

Led for Validus by Nirvani Sookdeo, Global Head of Risk Advisory in collaboration with Alain Smith, Head of EMEA Client Engagement.  

Nirvani Sookdeo comments “We are delighted to have advised Arcmont on this landmark transaction. Continuation vehicles introduce a distinctive set of FX considerations - the interests of exiting and incoming investors must be carefully evaluated to ensure the transaction workflow delivers consistent economic outcomes across both groups. Our focus was on providing the analytical framework and operational clarity to navigate that complexity.” 

Alain Smith noted "We've worked alongside Arcmont for years, and what stood out on this landmark secondaries transaction was the speed at which decisions needed to be made and modelled. We are delighted to have supported Arcmont in coordinating FX strategy across exiting and incoming LPs as well as executing within a tight transaction window.” 

This transaction extends a multi-year working relationship between Validus and Arcmont across FX risk strategy, ISDA Advisory, onboarding and execution.