The Parliamentary Pension scheme has introduced a new asset class called alternative credit allocation with a 5% allocation. “The fund should also benefit from the illiquidity premium association with this type of debt mandate,†states a report published in February.
A number of alternative credit opportunities have arisen from new regulations in the banking sector, and new cap-ad requirements have led banks to retreating from the loan market, meaning more institutional investors are lending directly. Here is what Cazenove say about the growth:
- Finance is one of the most important tools in the business toolbox; getting the right money at the right time is paramount. When looking for a medium to long term loan there is more and more emphasis being placed on ensuring that businesses get the right product to meet their needs. It is the understanding that matching the type of finance to use the cash will be put to is so vital. When surveyed most business owners first think of their banks as the place to borrow; yet most applications are turned down due to very rigid lending criteria and low risk. However there are many alternatives available.
Those IFAs who observed the growth in retail alternative assets post 2003 will nod sagely. We know the cost of venturing outside the regulated zone, but it seems the fund managers cannot resist the temptation of off-balance sheet financing.