Alcentra sees Europeans lending their way to income
As the ability of European banks to lend is cut off by stricter Core Tier 1 ratio requirements, there is a golden opportunity for investors to profit by pooling money to lend against assets on a secured basis, says BNY Mellon’s boutique Alcentra.
The provider recently launched a prospectus for a Guernsey domiciled closed ended investment company (fund) that is looking to raise £150m via a London stock market listing. The fund intends to use the money to invest in secured debt and high yield debt of European and some North American companies.
At least 80% of the fund’s net asset value (NAV) is intended to be in senior secured floating rate debt, as well as secured subordinated debt, and some unsecured floating rate and secured or unsecured fixed rate high yield bonds.
This will be one of the first vehicles of its type in the European context to offer retail access to this part of the lending market; historically it has been the preserve of institutional investors, a key difference compared to the US market, where there are a number of mutual funds available for investors who want to profit from lending money to corporate borrowers.
And although Alcentra’s vehicle in the first instance is targeting UK investors, it may incidentally revive Continental European interest in the UK investment company structure. At the institutional investor level, clients such as pension funds across the region face similar challenges of meeting rising liabilities from an ageing population, and are looking to alternatives and new types of income generating products in order to facilitate risk management.
David Forbes-Nixon, chairman and chief executive officer, said that there was already a certain level of interest in this type of vehicle from non-sterling investors, while the investment company’s prospectus notes that that the “minimum size of the sterling share class will be £20m and the minimum size of the euro share class will be €20m.”