Star Mountain Capital, a private credit and secondaries specialist investment firm focused on generating premium returns from the less efficient and labor-intensive market of U.S. private small and medium-sized businesses (the “lower middle-market”), closed its Value-Added Direct Lending Fund IV above its $750 million LP capital target at approximately $1.2 billion (committed capital including debt facilities). The Fund was supported by both existing and new investors, including public pension funds, insurance companies, asset managers, banks, endowments, foundations, family offices and RIA/wealth management platforms and their clients. There was strong support from new and longstanding clients from 25+ U.S. states, and approximately 20 countries including from regions such as Canada, Europe, the Middle East, Australia, South America, and Asia.
As a result of the current market opportunity and Star Mountain’s robust platform, Fund IV is over 90% deployed. Fund IV follows Star Mountain’s previous funds’ direct lending investment strategy to provide primarily senior secured loans with potential equity upside (generally via warrants and / or structured preferred equity) across a diversified pool of over 50 companies in recession-resilient industries throughout the U.S. Investors also potentially benefit from Fund IV often co-investing alongside Star Mountain’s private BDC and SBIC fund which provides it with additional buying power for portfolio diversification. Fund IV has achieved its target diversification of approximately 50 portfolio companies.
Fund IV provides strategic financing to assist high quality, established private businesses finance acquisitions and organic growth, often capitalizing on the aging demographic universe of business owners looking to exit at potentially compelling valuations for buyers. Star Mountain believes it can continue to generate above market cash yields with tax-advantaged equity upside giving investors diversified access to this large and fragmented marketplace. This strategy has generally shown to be uncorrelated to the performance of larger U.S. companies, other asset classes and geopolitical risk factors.
Star Mountain’s differentiated origination platform includes team in 20+ cities nationwide, 100+ hosted / participated events annually, and a branded digital media content platform to maintain frequent contact with business owners and their advisors. Its private equity-style, value-added lending approach aims to align Star Mountain with its borrowers to help them become “middle-market ready,” increasing enterprise value at exit while also helping optimize capital protection. It's first lien loans with structured equity targets asymmetric returns including capitalizing on the valuation arbitrage that is often available from growing companies into a more competitive marketplace and further professionalizing them.