westbrooke & RMB close UK hybrid fund with £155 million available

Westbrooke Alternative Asset Management, in partnership with Rand Merchant Bank (RMB), is pleased to announce the first close of the Westbrooke Dynamic Opportunities UK Fund II Plc (WDO UK Fund II), with £155m (c.R3.8 billion) of capital now available to invest in hybrid capital transactions across the UK lower-middle market.

WDO UK Fund II underscores Westbrooke’s expertise in delivering innovative, risk-managed investment solutions to sophisticated investors. The fund provides a debt-led approach to UK private equity investing, targeting to pay investors an annual cash yield of 6-8% and to generate an overall annualised return of 15%+ p.a. in GBP (net of all fees and costs).

The fund provides bespoke unitranche and hybrid capital financing solutions to UK lower-middle market businesses. In addition, Westbrooke often negotiates equity upside participation through instruments such as preferred equity, equity warrants, and co-investments.

Hybrid capital investing is particularly compelling in the current market environment, characterised by high but declining UK interest rates, limited access to capital, and a retreat by the high street banks. This creates opportunities for alternative lenders such as Westbrooke.

Investors benefit from contractual, interest rate-linked yields that provide an inflation hedge, reduced volatility compared to public markets, and portfolio diversification, while accessing the growth potential of UK lower-middle market businesses.

WDO UK Fund II aims to invest in a diversified portfolio of 8–12 transactions over an 18-24 month deployment period. The fund remains open for further investment through a second close which will be concluded later in the year.

In late 2022, Westbrooke launched WDO UK Fund I. To date, this first fund has performed well, delivering a cash yield of 8% p.a., a run-rate IRR of 15% p.a. and has returned more than 35% of initial committed capital to investors.

Dino Zuccollo, head of Investor Solutions at Westbrooke Alternative Asset Management, commented: “The successful first close of Fund II alongside RMB reflects the confidence that our investors have in our ability to deliver predictable, risk-managed returns through our hybrid capital strategy. Clients gain access to capital preservation with upside optionality through debt like protections combined with equity upside potential in a market segment underserved by traditional lenders.”

Richard Asherson, head of Westbrooke UK, added: “The enhanced fund structure broadens our capacity to underwrite structured lending solutions whilst maintaining our disciplined approach to risk. We engineer hybrid capital solutions that integrate senior debt with other components of the capital structure, leveraging unitranche efficiency to deliver a cohesive, debt-led offering – we’re responding directly to growing demand for non-traditional capital structures that meets the needs of entrepreneurs and financial sponsors.”

Rob Leon, co-head of RMB’s Investment Banking Division, added: “Westbrooke’s expertise in the UK lower-middle market, proven track record, and innovative approach make them an ideal partner for RMB, while allowing Westbrooke to continue to support UK businesses with flexible capital solutions. Our commitment in WDO, deepens our strong partnership with Westbrooke and demonstrates our capabilities in supporting our key sponsor clients”

Westbrooke’s track record in the UK reinforces this offering. Since establishing its UK business in 2017, Westbrooke UK has arranged and invested approximately GBP750 million combined deal value.

_{* Westbrooke Dynamic Opportunities UK Fund II Plc is marketed in South Africa under a CIPC registered prospectus.}

Click here to find out more about our Dynamic Opportunities UK offering.

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Listen below to Dino Zuccollo and Simon Brown discuss a new era for investment strategies – from 60/40 to 40/30/30

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About Westbrooke Alternative Asset Management

Westbrooke Alternative Asset Management is a multi-asset, multi-strategy manager of alternative investment funds and co-investment platforms. Operating across South Africa, the UK, and the USA, Westbrooke invests its own capital alongside its investors in private debt, hybrid capital, real estate, and private equity, with a focus on capital preservation and generating predictable, risk-managed returns.

For more information visit www.westbrooke.com

About Rand Merchant Bank

RMB is a leading African Corporate and Investment Bank (CIB). We partner with our clients to deliver advisory, lending, trading, securities, corporate banking, private equity and investment solutions. A presence in London, New York, Shanghai and Mumbai provides our global clients with a network to access African markets. We have a deal footprint in 35 African countries and facilitate cross-border trade and investment on the continent. RMB represents the CIB activities of FirstRand Limited – one of the largest financial services groups in Africa.

For more information visit www.rmb.co.za