In September last year real estate veteran Paul Weightman started hiring for a new fund manager designed, in the 62-year-old’s own words, to “redefine the private credit landscape”.
For months the goal looked like a tall order: early this year the company’s personnel listed on its website only included Weightman and another executive.
That all changed on March 8 when more than 20 senior executives at $381bn asset manager Barings resigned en masse in what has been described as “one of the largest corporate raids” in asset management history.
Their destination was not a larger rival or a Wall Street giant, it was Weightman’s Corinthia Global Management.
The audacious move has ignited a rare public feud in the asset management industry: on Monday Barings filed a lawsuit against two of its defecting executives and Corinthia.
It also shows the lengths that businesses will go to to win a share of the booming $1.7tn private credit market.
Barings first became involved in the industry in 1992 when it established a private finance group. In 2005, US life insurer MassMutual took over Barings Asset Management, as well as the right to use the Barings name.
But it was not until about a decade later that the private credit business really took off.
Tougher regulation following the financial crisis meant banks retreated from lending to small and medium-sized businesses across the US and Europe.
Barings was among the biggest beneficiaries of this trend, stepping in to fill the gap. Private credit assets under management soared as investors were attracted by high single-digit returns during a long period of low interest rates around the world.
Large private equity groups such as Blackstone and Apollo were drawn into the corporate lending market, expanding well beyond their leveraged buyout roots, while other more specialist groups including HPS, Ares and Barings were able to create sizeable businesses, partly by helping finance private equity buyouts.
In recent years, banks have sought to re-establish their presence in the market, with lenders including Barclays and Wells Fargo setting up partnerships with asset managers to do so.
In 2022, Weightman entered the fray and set up Corinthia, later securing the backing of Japanese bank Nomura.
He was an unusual candidate to launch a private credit firm, having spent more than two decades running listed Australian real estate firm Cromwell Property Group, before retiring in December 2020.
Weightman’s big move came six months after he began recruiting for his new venture, Corinthia said. On March 8, more than 20 of the most senior executives in Barings’ 100-strong private credit team handed in their resignations, including co-heads Ian Fowler and Adam Wheeler, the only member of the Barings team who had previously met Weightman, Corinthia said.
According to court filings, an hour after the resignations, Weightman emailed MassMutual’s chair Roger Crandall, asking to talk to him over the weekend.
Early the next morning, he sent another message, this time warning the departures would “create a range of issues” for Barings’ credit business and attaching a term sheet offering to buy the business.
Under the terms of his offer, Corinthia would take over the running of Barings’ global private finance business. The offer was swiftly rejected.
This did not stop Corinthia continuing to pursue more executives from Barings, the filings alleged, on top of the two dozen or so they had already landed.
One of the departing group told another Barings employee that Corinthia was “coming after everyone”.
Weightman continued to pursue more hires, including sending unsolicited offers to the personal email addresses of Barings’ executives, the lawsuit alleged.
Barings’ rivals quickly began to circle, looking to take market share from a significant player. At least two of its competitors are considering loan refinancing offers to private equity firms that Barings has lent to, according to people familiar with the negotiations.
The raid, which one rival to Barings described as “aggressive” and a tactic they had never seen before, carries a risk that the loans Barings currently holds are refinanced by other lenders keen to take advantage of the situation.
When private credit firms are willingly put up for sale, it is not unusual for a quarter of that firm’s loan book to be refinanced by rivals. It is potentially more fraught when a situation is hostile, the rival added.
“Typically this would create a run on the portfolio because anyone in those deals would try to refinance them out,” the person said. “And it raises bigger issues of how do [private equity] sponsors feel about them?”
Initially, Barings insisted it was business as usual but on March 11, it was forced to replace its private finance investment committees, which are responsible for deciding on investments.
The company last week said it had been able to “successfully transition to new leadership” and remained “able to invest”.
That changed this week when it announced it was suspending new investments in many of its flagship private credit funds and tried to address the uncertainty caused by the mass defections.
“In the coming weeks, we anticipate introducing to the investor base proposals for new key persons,” Barings told its clients. “We are paused on making brand new investments while we continue the transition to new investment leadership.”
It also announced the legal action, filing complaints against Corinthia and two of its former executives, Fowler and Kelsey Tucker.
“Defendants and their co-conspirators planned and attempted to establish a new private credit operation for Corinthia using Barings’ employees and its business processes, methodologies, and knowhow, and by soliciting clients of Barings,” the lawsuit alleged.
In a statement on Tuesday, Barings said it “remains open for business and able to invest across our private credit platform” and it would “continue to provide meaningful capital support to our many sponsor clients”.
Corinthia, meanwhile, is still hiring. Although it has decided against pursuing any more Barings employees.
“We are continuing to advertise and recruit for positions in the US, UK and Australia, although we are not soliciting any additional employees from Barings,” the company said.
Nomura declined to comment.
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