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Investment Perspectives - Winter 2022

Direct Lending: A Decade On

31 Jan 2022

Hymans Robertson was one of the first consultants in the UK to recognise the attractiveness of the direct lending market, where alternative lenders lend to mid-market corporates. Now over a decade on, most of our Defined Benefit clients have exposure to the market. This article looks at how the market has evolved over the period and revisits the argument for investing in the asset class and discusses the main considerations now for our clients.

Direct lending has exploded with many investors allocating to the asset class. And it’s still growing, with more investors expecting to further increase their allocations over the coming years. While the asset class evolved in the US before the Global Financial Crisis (“GFC”), in Europe it was mainly borne out of the GFC. However, the European market is quickly catching up to the US in terms of alternative lender market share.

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Disclaimer

This report has been prepared by Hymans Robertson LLP, and is based upon our  understanding of events as at 31 January 2022. It is designed to be a general summary of topical investment matters and is not specific to the circumstances of any particular employer or pension scheme. The information contained in this report should not be construed as advice and not be considered as a substitute for specific advice as the information is generic in nature. Where a podcast refers to legal matters please note that Hymans Robertson is not qualified to provide legal opinion and therefore you may wish to obtain independent legal advice to consider any relevant law and/or regulation. Hymans Robertson LLP accepts no liability for errors or omissions. Your Hymans Robertson LLP consultant will be pleased to discuss matters raised in this podcast in greater detail.

Please note the value of investments, and income from them, may fall as well as rise. This includes but is not limited to equities, government or corporate bonds, derivatives and property, whether held directly or in a pooled or collective investment vehicle. Further, investments in developing or emerging markets may be more volatile and less marketable than in mature markets. Exchange rates may also affect the value of investments. As a result, an investor may not get back the full amount of the original investment. Past performance is not necessarily a guide to future performance.

Private debt investments, whether held directly or in pooled fund arrangements, carry a higher risk than publicly quoted securities and may not be suitable for all types of institutional investor. The nature of private debt pooling vehicles makes them particularly illiquid and investment in private debt should be considered to have a long time horizon.

Hymans Robertson LLP is authorised and regulated by the Financial Conduct Authority and Licensed by the Institute and Faculty of Actuaries for a range of investment business activities.

Direct Lending: A Decade On

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