Prestige Fund Management, the specialist asset manager that focuses on lending to small and medium businesses in the UK, has launched a second new share class (Participating ID Shares) for a Middle East based, sovereign wealth fund. The new mandate, from a single group in the region, involves a minimum three year commitment to Prestige’s direct lending strategy. Unlike the first share class launched last month, this share class will be open to outside institutional investors and available in a range of hedge currencies (GBP / EUR / USD / CHF).
The initial allocation of US$20 million is structured via a dedicated share class that will pay a quarterly coupon of 1-2%, with the option to increase the investment at a future date.
Asset-based lending in the UK is rapidly becoming mainstream, growing 22% last year, with GBP£4.3 billion of finance available in December. The UK government has also started to require banks to pass on the details of small companies they are not able to support to specialist lending platforms, creating a larger market for private lending funds.
Commenting on the new share class, Craig Reeves, Founder of Prestige Fund Management, said: “The trend for pension schemes to re-allocate from low-yielding bonds to private debt represents a major shift in the institutional investment landscape: private lending funds meet part of that demand for consistent, uncorrelated returns.”
Some investors have seen disappointing returns from funds investing in public markets during 2016, and negative or low yields from some mainstream debt markets. Private lending funds provide an alternative to this, including the possibility of more predictable returns.
According to research group Preqin, 57% of institutional investors planned to commit more to private debt in 2017 than last year, while 62% said they planned to increase their allocation over the longer term as well. Yet less than half of institutional investors currently allocate to this asset class, heralding scope for more growth in coming years.
Founded 10 years ago, Prestige has raised over US$1.4 billion for its UK-focused asset-based lending funds. It specialises in lending to small and medium-sized companies in the rural sector, including project finance for alternative energy and other environmentally-friendly infrastructure projects.