UK Lending Funds in the Post-Brexit Environment

While the Brexit vote might have injected a note of political uncertainty into the future of the United Kingdom, and while the falling pound has raised the spectre of inflation again, many of the fundamental investment stories that support inward investment to the UK remain in place.

Interest in the UK as a market for investment does not seem to have dissipated: speaking purely from the Prestige perspective, we have continued to see enthusiasm for lending strategies focused on the UK in the wake of the Brexit vote, with both website traffic and site visits from foreign investors reflecting an interest in both the uncorrelated nature of lending, and the stability of the value of the assets against which lending is secured (e.g. British farmland).

Foreign clients, if anything, see an opportunity from the weaker British pound to increase their exposure to the UK. While we have seen this in the short term from the rise in the price of UK-listed companies, there is also considerable interest in the long-term prospects for the UK economy and yields to be earned from effectively managed lending strategies. Interestingly, enthusiasm for UK lending strategies from abroad far outstripped domestic demand throughout the Brexit news cycle. But why is this the case?

The UK as a destination for loan finance
The UK has always been regarded as one of the top prospects for foreign direct investment – international money flowing into the property sector is just one indicator of this. Lending funds, which have been expanding their share of the alternative assets market as government bond yields have hit correspondingly negative territory, represent both an uncorrelated source of returns and, in the case of the rural sector, bring the additional attraction of loans often secured against prime UK farmland.