– New study reveals that 87% of investors in financial markets pursue a direct lending strategy
– However, almost half (47%) are not confident in their ability to manage loss recovery
LONDON, May 20, 2021 / PRNewswire / – An overwhelming majority (87%) of capital market investors pursue direct lending strategies, although nearly half (47%) lack confidence in their ability to handle loss recoveries, leading to could have serious implications if business failures increase due to a pandemic. government support schemes are abolished.
According to a capital markets report, Navigating CovExit: Searching for Value in Debt Markets, commissioned by Ocorian1, a global leader in capital markets, fund administration, and corporate and trust services1, the majority (57%) of capital market investors have a direct lending strategy that they are looking to develop, and 30% have a strategy that they are executing.
With $ 207 billion deployed by 327 direct loan funds around the world over the past 10 years2, the study highlights a lack of investor confidence in the ability of their direct loans to weather the storm. They expressed the least confidence in recovery of losses (47%), risk assessment (53%), filing of returns (54%) and monitoring of commitments (57%).
Ocorian commissioned an independent study of 100 financial market decision makers working in investment banks and private equity firms in Europe, North America, Africa and Asia assess their operational readiness as they plan their post-coronavirus pandemic investment strategies.
Respondents from start-ups under 10 were the least confident about their direct loan loss recovery abilities, with only 41% expressing confidence. Regionally, levels of confidence in the ability to have strong loss recovery capabilities were lowest among European respondents (28%) – significantly behind North American (40%), African (48%) respondents and Asian (72%).
Despite their concerns, around 92% of respondents expect bankruptcies and corporate restructurings to present them with opportunities in the next 12 months, of which 22% believe these opportunities will be significant.
Alan booth, Global Head of Capital Markets at Ocorian said: “Relatively few defaults to date suggest that private debt investments have been resilient, but government support and low cost of financing can mask a varying degree of trauma in the market.” As this support wanes and interest rates rise, we can expect to see distress and even opportunity in some sectors.The reaction of private debt managers will be varied and the hawks are likely to be more numerous as the doves.
“Despite their operational concerns and weakening near-term fundamentals in private credit markets, investors are increasingly drawn to the sector in anticipation of debt restructurings as well as M&A activity resulting from the pandemic. . Succession to direct loans may have difficulty adapting their infrastructure to meet their need for rapid execution.
“It is essential that managers have sufficiently robust and scalable operational, risk management and compliance processes internally or through an outsourced arrangement to avoid unnecessary delays and risks to themselves and their LPs. “
To learn more, join the June 9 webinar or to download the full report Navigating CovExit: Searching for Value in Debt Markets, click here.
Notes to Editors
1 The research was conducted with a panel of 100 high-level financial market professionals March 2021. All respondents were involved in business decision-making processes and were evenly distributed Europe, North America, Africa and Asia, from medium or large capitalization investment banks or private equity firms. Respondents worked in companies with balance sheets ranging from around $ 50 billion to finish $ 1 billion.
2 Preqin data published in S&P Market Intelligence 2021 Direct Lending Outlook document on 18e December 2020
Ocorian is a global leader in business and trust services, fund administration and financial markets. He has 260 billion USD in assets under administration and employs 1,250 professionals.
Supporting and protecting global investments is Ocorian’s priority; it manages more than 17,000 structures on behalf of 8,000 clients, including financial institutions, large international organizations and high net worth individuals.
Ocorian provides fully compliant solutions tailored to the needs of clients, no matter where in the world they have financial interests or whatever their structure.
The group offers a full range of services to companies, funds and private clients through a network of 16 offices covering all the financial centers of the world. Locations include Bermuda, BVI, Cayman, Guernsey, Hong Kong, Ireland, Isle of man, Jersey, Luxembourg, Malta, Mauritius, Netherlands, Singapore, UAE and UK, as well as a representative office in the US.
To learn more about Ocorian and its services, including regulatory information, visit www.ocorian.com