Felicitas Analyst Position

Hi there,

Thanks for your interest in Felicitas! Firstly, apologies if there any typos as I am responding from my mobile while travelling. Secondly, if there any "down votes" on others posts, it did not come from me.

There is purposefully not a lot of public information on our firm so it makes sense as to why there is some ambiguity as to what our investment strategy is, but some of the above comments are inaccurate.

Firstly, in terms of annual revenue and fees, the figure quoted above is far off. As of 12/31, our AUM is $819mm and we manage three products: Credit Secondaries, Credit Fund of Funds, and a Diversified Fund of Funds.

Our first secondary fund was a 2016 vintage with $100mm in committed capital. This was long before my time at the firm as I have only been here for 2.5 years, but ~70% of invested capital was in LP secondaries largely in credit funds. The remaining 30% of the exposure was doing structured transactions such as NAV Loans and Pref. Equity. The fund was a bit ahead of its time as there weren't many pure play credit secondaries funds back then. The fund used zero leverage (a trend which we continue to this day). Net returns have been very strong - off the top of my head, as of 12/31 it is a 1.54 TVPI, 1.08x DPI, and 12.5% IRR. If you remove the recycling it looks more like a ~1.45x and 15% Net IRR.

Our second secondary fund was a 2020 vintage with $213mm in committed capital. The strategy was in the inverse of Fund I, whereby ~70% of invested capital were in structured transactions and ~30% were in LP secondaries. This fund continued to use no leverage and targetted higher returns. As of current date we have recycled around 17% of invested capital and we hold the fund around a 1.54x and IRR >25%. I suspect this will end up being a 1.8-1.9x Net TVPI and 17-18% Net IRR type fund.

In terms of strategy, our core focus is Structured Secondaries - to us this means working primarily with GPs to effectuate liquidity solutions with extreme downside protection. Typical themes are low LTV NAV Loans, Pref. Equity, GP-leds with some form of structure. Unlike a lot of our competitors we aren't afraid of concentration - a lot of our deals involve stripping out a single company from a fund and issuing debt or pref. equity against that single asset. Our funds are still diversified where we don't like more than ~3% exposure to a single business...Fund I had around 32 deals and Fund II had 48 deals - that's a lot of work to construct highly bespoke liquidity solutions.

Further, we do not compete in auctions. Our cost of capital is significantly higher than our competitors so we have to seek out proprietary opportunities. In terms of the comment above where only one staff member has resigned to date, this is accurate, and is actually really impressive. For starters, the firm has been around since 2012 and had only 6 staff up until 2021 - during this time no one had left. I joined the firm in Oct. of 2021 and have expanded the team from 6 to 12 and we are continuing to grow. In the 12 years of the company's existence, the one staff member that left went to go do his MBA and there are even talks about him rejoining once he is done. We have another analyst that will probably go do an MBA soon and he also wants to rejoin, so from a cultural perspective I frankly don't see how you can find better than at our firm.

What I would say is that it is accurate that we are a small player in the industry, but frankly that is by design. Our cost of capital works only if we do small deals - once you go big you need to compete in auctions and use leverage. Our LP base is extremely loyal and they have appreciated that we have grown steadily over time while not trying to raise funds too big for the returns we go after. In terms of competition, I only see there being realistically 2-3 groups that do similiar deals to us so we have a really strong angle/niche within the market.

Below are some examples of deals we executed:

1. GP-led deal where we attached as preferred equity ahead of rollover LPs (hah) - we had 2.4x EBITDA ahead of us as debt, and we detached at 3.5x EBITDA. The EV/EBITDA for the entire business was 8.5x. This was a company growing 40%+ consistently with 25% EBITDA margins - revenue was >1bn. What made this deal unique? For starters, we have uncapped upside yet sit senior to all of the equity, the business is best in class within its sector, and it was underlevered. We hold this at a ~2.3x TVPI, 0.33x DPI, and >80% IRR. I think we will get a 2.5x and 60% IRR out of this deal.

2. 10% LTV NAV Loan to a GP with 300mm of NAV. Priced at Prime (8.5%) + 10% (18.5% all-in and compounding quarterly). Prime is floored where the minimum all-in is 15% per annum compounding quarterly. Minimum MoiC is 1.6x with a 2% OID and 3 year maturity. All PIK. This will probably end up being a 20% IRR with a 1.65-1.7x MoIC. Underlying businesses have negligible leverage and we were able to have a lien placed on the largest portfolio companies.

Any further questions on our firm, please feel free to PM me here or on LinkedIn.

Thanks for your interest.

Calvin