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Authors

  • 22/05/2018
    Fixed Income
    Patrick Marshall
    The European small- and medium-sized enterprise (SME) lending market has traditionally been the preserve of the banks: they have vast networks and strong relationships for originating deals in this sector. The SME funding landscape, however, changed dramatically in the wake of the global financial crisis amid growing regulatory pressure – and investment firms filled a gap left by European banks to provide SME financing.
  • 09/02/2018
    Fixed Income
    Patrick Marshall
    Mark Miller, Head of Institutional meets with Patrick Marshall, Head of Private Debt and CLOs to discuss the Hermes European Direct Lending Strateg
  • 11/10/2017
    Fixed Income
    Patrick Marshall
    Direct lending is a promising market in Europe, but does it offer better opportunities than its more-established US counterpart? Patrick Marshall, Head of Private Debt & CLOs at Hermes Investment Management, assess the differences between the two and presents his views on what it takes to invest successfully in European loans. Europe: New kid on the bloc Europe’s emergence as a direct lending market is still relatively recent. The changing regulatory landscape in the post-financial crisis era transformed loan markets. New capital adequacy rules, amplified by the Capital Requirements IV directive under Basel III, have forced banks to reduce risk and therefore the size of their loan books. Prior to 2008, banks provided more than 80% of larger corporate loans in Europe. Data from S&P LCD shows the European loan market grew aggressively from €15bn in 1998 to €165bn in 2007, a year before the global financial crisis. In its wake, small- and medium-sized (SME) businesses had little access to capital. Their borrowing needs could not reach the scale required to cost-efficiently access the bond market. This created a gap in the market for alternative lending, and investment firms have filled the void left by European banks to provide SME financing. Direct lending now accounts for 10% of Europe’s loan market[2]. This rapid growth is in no small part driven by a surge of interest in the asset class. Investors with long-term liabilities are attracted by an illiquidity premium of almost 60bps, as well as a desire for strong yields that are lowly correlated with listed markets, capital preservation and inflation protection.