BNP Paribas Investment Partners completed the €500 million final close of a European SME Debt Fund for small and medium sized businesses through a combined solution of bank lending and fund financing.

The fund reached its €500 million target at first close, offering institutional investors, including insurers and pension funds, access to an innovative way to diversify their credit exposure.

The fund is set to offer between 100 to 150 SMEs a financing solution that combines a medium term bank loan of about five years with a long-term loan of about seven to 10 years.

With a focus on long term financing, the fund is complementary to traditional bank loans.  According to Laurent Gueunier, head of alternative debt management, at BNP Paribas Investment Partners, SME debt has a low default risk, a high recovery rate and enables investors to diversify their credit portfolios, while for insurers; it has the additional benefit of an attractive solvency capital requirement risk-return profile.

Investors in the fund include AG2R La Mondiale, BNP Paribas Cardif, CNP Assurances, l’ERAFP, Federal Finance Gestion (on behalf of Suravenir), La France Mutualiste, Groupama, MACIF, MAIF, Pensio B OFP and the BNP Paribas Group, as well as the European Investment Fund (‘EIF’), part of the European Investment Bank Group, which helps European SMEs to access financing.