Private Credit News UK & International

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Private Credit News UK: Latest Updates and Insights

Private Credit refers to loans made to companies by investors other than banks.

This type of lending has grown in popularity in recent years, as investors seek higher returns in a low-interest-rate environment.

Private credit can be a good option for borrowers who are unable to secure financing through traditional means, as well as for investors looking to diversify their portfolios.

Private credit news in the UK covers a range of topics, including the latest deals, analysis of market trends, and insights from industry experts.

Private equity firms are often involved in private credit transactions, and their activities can have a significant impact on the market.

Investors and fund managers must stay up-to-date with the latest news and analysis to make informed decisions about their investments.

Private Equity News UK - Key Takeaways

• Private credit is a popular alternative to traditional bank lending for both borrowers and investors.

• Private equity firms play a significant role in the private credit market.

• Staying informed about the latest news and analysis is crucial for investors and fund managers in the private credit market.

Understanding Private Credit in the UK

Private credit is a rapidly growing asset class that has become an increasingly popular source of finance for small and medium-sized businesses in the UK.

It refers to any form of lending that is not provided by traditional banks or other financial institutions. Instead, private credit is provided by private investors, including hedge funds, private equity firms, and other institutional investors.

Direct lending is one of the most common forms of private credit in the UK. It involves lending directly to businesses, without the involvement of banks or other financial intermediaries.

Direct lending can offer higher yields and greater control over lending decisions, making it an attractive option for investors.

Private credit covers a wide range of strategies and borrower types.

These range from senior secured loans for blue-chip corporate borrowers to junior unsecured credit for financing new building construction.

Private credit can also include loans against specialized assets, such as railcars and airplanes, or contractual revenue streams like royalties and subscription services.

The demand for private credit in the UK remains high, as demonstrated by the level of deal activity being observed across multiple sectors of the market.

This is due in part to the fact that traditional banks have become more cautious in their lending practices since the 2008 financial crisis. As a result, private credit has emerged as a valuable alternative source of finance for many businesses.

Private Credit News UK & International

Private credit is also an attractive asset class for investors looking to diversify their portfolios from traditional fixed income investments.

Private credit strategies can offer higher yields and lower volatility than traditional fixed income investments, making them an attractive option for investors seeking to generate higher returns.

In summary, private credit has become a valuable source of finance for small and medium-sized businesses in the UK.

Direct lending is one of the most common forms of private credit, and private credit covers a wide range of strategies and borrower types.

The demand for private credit remains high, and it is an attractive asset class for investors seeking to diversify their portfolios.

Private Equity News UK

The Role of Private Equity in Private Credit

Private equity firms have played a significant role in the growth of private credit markets in recent years.

Private equity firms typically have a team of experienced professionals who are well-versed in identifying investment opportunities and managing risk.

As such, they are well-positioned to invest in private credit markets, which are often characterized by complex and illiquid investments.

Private equity firms have been active in private credit markets in a number of ways.

One of the most common ways is through buyout financing.

Private equity firms often use debt financing to acquire companies, and they may use private credit funds to provide this financing.

Private credit funds can offer attractive terms to private equity firms, including lower interest rates and more flexible repayment terms.

Apollo Global Management is one private equity firm that has been active in private credit markets.

The firm has a dedicated private credit team that invests in a range of credit strategies, including direct lending, distressed debt, and structured credit.

Apollo's private credit team has been successful in generating attractive returns for investors, and the firm has raised billions of dollars for its private credit funds.

Private equity firms can also invest in private credit markets through direct lending.

Direct lending involves providing loans to companies directly, rather than through a bank or other intermediary.

Private equity firms can use their expertise to identify attractive lending opportunities and manage the associated risks.

In summary, private equity firms have played a significant role in the growth of private credit markets in recent years.

Private equity firms have been active in private credit markets through buyout financing, direct lending, and other strategies.

Apollo Global Management is one private equity firm that has been particularly active in private credit markets, with a dedicated private credit team that invests in a range of credit strategies.

News and Analysis on Private Credit

Private credit markets in the UK continue to thrive amid the current economic uncertainty.

According to a report by M&G Investments, the demand for private credit from borrowers remains high, as demonstrated by the level of deal activity across multiple sectors of the market.

Private Credit News UK & International

Investors also continue to look to the potential benefits offered by short-dated private credit assets, given broad-based uncertainty about the macroeconomic backdrop.

However, the Bank of England has warned lenders to be "very careful" in the private equity and private credit markets amid a rise in interest rates.

Nathanaël Benjamin, executive director at the Bank of England, cautioned that lenders should exercise caution when investing in private credit and private equity, stating, "Here I would say: be very careful."

In other news, Kreos Capital, a London-based firm that provides growth and venture debt financing to companies in the technology and healthcare industries, has been acquired by BlackRock in an effort to boost its private debt capabilities.

This acquisition is part of BlackRock's broader strategy to strengthen its toehold in the private credit space.

Additionally, the Financial Times reports that competition watchdogs in the US are targeting private equity firms, while Brazil battles for chemicals.

The FT also provides regular due diligence on private equity, with recent articles on Weinstein, Ackman, and Lasry making a play for Sculptor, and the rise of private credit.

For those looking to stay up-to-date on the latest news and analysis on private credit, there are a variety of resources available.

The FT's Private Equity section covers the latest news and trends in the private credit space, while M&G Investments offers a quarterly newsletter with insights into the private credit market.

MyFT also provides a personalized news feed on private credit and related topics.

The Impact of Interest Rates on Private Credit

Private credit is a type of investment that offers attractive yields to investors who are willing to take on the risk of lending to companies that may not be able to secure financing through traditional banks.

Private credit investments are typically illiquid, meaning they cannot be easily sold or traded, and they are often held to maturity.

One of the key factors that can impact the performance of private credit investments is interest rates.

When interest rates rise, it can have a negative impact on private credit investments.

Higher interest rates can make it more expensive for companies to borrow money, which can lead to lower demand for private credit investments.

This can result in lower yields for investors and can make it more difficult for private credit funds to raise capital.

Inflation can also impact private credit investments.

When inflation is high, it can erode the value of fixed income investments, including private credit investments. This can result in lower yields for investors and can make it more difficult for private credit funds to raise capital.

Valuations are another important factor to consider when investing in private credit.

When interest rates rise, it can lead to lower valuations for private credit investments. This can make it more difficult for private credit funds to exit their investments and can result in lower returns for investors.

Overall, the impact of interest rates on private credit investments is complex and can vary depending on a number of factors.

However, it is important for investors to carefully consider the impact of interest rates on their private credit investments and to seek the advice of a qualified financial advisor before making any investment decisions.

Investing in Private Credit

Private credit has emerged as an attractive investment opportunity for investors seeking higher returns than traditional fixed-income investments.

Private credit investments offer a range of benefits, including higher yields, lower volatility, and the ability to invest in a diversified portfolio of assets.

Investments in private credit can be made through various channels, including private credit funds, revolving credit facilities, and direct investments in portfolio companies.

Private credit funds are investment vehicles that pool capital from investors to invest in private credit assets.

These funds typically focus on a specific sector or geography, such as real estate or infrastructure, and offer investors exposure to a diversified portfolio of assets.

Private credit funds have been successful in raising significant amounts of capital from investors in recent years.

According to a report by Preqin, private credit funds raised a record $130 billion in 2021, up from $119 billion in 2020.

This trend is expected to continue in 2022, with fundraising activity remaining robust.

Revolving credit facilities are another popular way to invest in private credit.

These facilities provide companies with access to a line of credit that can be drawn upon as needed. Investors in revolving credit facilities earn interest on the funds that are drawn down, providing a steady stream of income.

Investing directly in portfolio companies is another way to gain exposure to private credit.

This approach involves making loans directly to companies in need of financing.

This can be done through a variety of structures, including senior secured loans, mezzanine debt, and equity co-investments.

Investing in private credit requires a thorough understanding of the risks and rewards associated with these investments.

While private credit investments offer the potential for higher returns, they also carry higher risks than traditional fixed-income investments.

Investors should carefully evaluate the creditworthiness of the underlying borrowers and the quality of the collateral securing the loans.

In conclusion, private credit investments offer investors an attractive opportunity to earn higher returns than traditional fixed-income investments.

Investors can gain exposure to private credit through a variety of channels, including private credit funds, revolving credit facilities, and direct investments in portfolio companies.

However, investors must carefully evaluate the risks and rewards associated with these investments and conduct thorough due diligence before making any investment decisions.

Risks and Resilience in Private Credit

Private credit has become an increasingly popular asset class in recent years, with direct lenders replacing banks and public debt markets in financing some of the riskier investments.

However, with the possibility of continued volatility, economic uncertainty, and even a recession, the risks associated with private credit cannot be ignored.

One of the main risks associated with private credit is the potential for volatility in the market.

As we head into 2023, the downside mitigation characteristics of investment-grade private credit could be valuable, as the public market faces the possibility of continued volatility.

Private credit has proven to be more resilient than public markets during times of economic uncertainty, and investors have turned to it as a way to diversify their portfolios.

Private Credit News UK & International

Another risk associated with private credit is the potential for a recession.

While private credit has historically performed well during economic downturns, there is always the risk that a recession could lead to a decrease in demand for credit and a rise in defaults.

As a result, investors must be diligent in their due diligence and carefully assess the creditworthiness of potential borrowers.

Despite these risks, private credit has shown resilience in the face of economic uncertainty.

Leveraged buyout groups, many of which now have big credit investment units, have been particularly active users of the industry, weaving private equity and debt financing together to create a more stable investment.

Overall, private credit remains an attractive asset class for investors looking to diversify their portfolios and mitigate risk.

However, investors must be aware of the potential risks associated with private credit and perform their due diligence to ensure that they are investing in stable and creditworthy companies.

Private Credit in Global Markets

Private credit and infrastructure investments across emerging and developing markets surged to record levels in 2022 as borrowers looked for alternative financing options.

According to a Reuters report, private credit investments in these markets increased by 89% in 2022, indicating the growing demand for such financing solutions.

Private credit markets are staying the course, despite the volatility and uncertainty that buffet publicly-traded markets amid headwinds.

Long-term investors are safeguarding their returns by investing in private credit markets. Private credit markets offer a range of benefits, including higher yields, lower volatility, and lower correlation with other asset classes.

In 2023, global private markets fundraising declined by 11% to $1.2 trillion, according to the McKinsey Global Private Markets Review.

Real estate and private equity declined most precipitously from 2021's record highs, while private credit proved more resilient.

The growth in private equity funds is arguably leading to opportunities for private lenders, with equity expansion into newer sectors also helping to expand the definition of real assets, such as infrastructure and real estate, in the debt markets.

Looking ahead to the next five to ten years, the direction of travel seems clear as private credit markets continue to thrive amid the uncertainty.

Private credit markets in Asia, Latin America, Africa, and the Middle East are growing rapidly.

These markets offer attractive opportunities for investors seeking higher yields and lower volatility.

Capital markets are expanding, and new markets are emerging, providing a range of opportunities for private credit investors.

The Role of Credit Fund Managers

Credit fund managers play a crucial role in the private credit market by providing funding to businesses that are unable to access traditional bank loans.

They are responsible for sourcing, underwriting, and managing loans to borrowers, and they typically invest in a range of credit instruments, including senior secured loans, mezzanine debt, and distressed debt.

Private credit managers are becoming increasingly popular among institutional investors, with pension funds and other large investors increasing their allocations to the asset class.

According to a report by Intertrust Group, assets in private credit funds grew by 53% over the past five years to reach a total of $1.6tn.

Credit fund managers typically charge fees based on the assets they manage, as well as performance-based fees.

They also often require a minimum investment from investors, which can range from $1m to $10m or more.

One of the advantages of investing in private credit funds is the ability to generate attractive returns while also providing diversification to a portfolio.

Private credit managers typically target returns in the mid-to-high single digits, which can be particularly attractive in a low-interest-rate environment.

However, investing in private credit funds also carries risks, including the risk of default by borrowers and the risk of illiquidity.

Private credit funds are typically less liquid than publicly traded bonds, and investors may have to wait several years before they can exit their investments.

Overall, credit fund managers play a critical role in the private credit market, providing funding to businesses that may not otherwise have access to capital.

While investing in private credit funds can be attractive for investors seeking diversification and attractive returns, it is important to carefully consider the risks involved before making any investment decisions.

Digital Integration and Private Credit

As digitalisation continues to transform the financial industry, private credit markets are also embracing technology.

Digital integration is being used to streamline processes, increase efficiency, and enhance the investor experience.

One way in which digital integration is being utilised in private credit is through the use of online platforms.

These platforms provide investors with access to a wide range of private credit opportunities, making it easier for them to find and invest in the deals that best suit their needs. They also enable investors to manage their investments online, providing them with real-time information and updates.

Another area where digital integration is having an impact is in the underwriting process. By using data analytics and artificial intelligence, private credit firms are able to more accurately assess the creditworthiness of potential borrowers.

This not only speeds up the underwriting process but also reduces the risk of defaults.

Digital integration is also being used to improve communication between investors and borrowers. Online portals allow borrowers to provide updates on their projects, while investors can track the progress of their investments in real-time.

This level of transparency and communication is helping to build stronger relationships between investors and borrowers, which can lead to more successful deals in the future.

Overall, digital integration is playing an increasingly important role in the private credit market. By embracing technology, private credit firms are able to offer investors a more streamlined and efficient experience, while also reducing risk and increasing transparency.

As the industry continues to evolve, it is likely that digital integration will become even more important in the years to come.

Private Credit and Social Considerations

Private credit has become a popular investment option in recent years, with investors seeking higher returns than those offered by traditional fixed-income securities.

However, private credit investments also have social considerations that investors need to keep in mind.

One of the main social considerations of private credit is its impact on the wider society.

Private credit can be a lifeline for small and medium-sized enterprises (SMEs) that may struggle to secure funding from traditional banks.

By investing in private credit, investors can help these businesses grow and create jobs, which can have a positive impact on the wider economy.

However, private credit investments can also have negative social impacts, particularly if they are made in companies that engage in unethical practices.

Investors need to carefully consider the social impact of the companies they are investing in and ensure that they align with their values.

Another social consideration of private credit is its impact on private companies. Private credit can be a useful source of funding for private companies that may not have access to public markets.

However, private credit investments can also come with restrictive covenants and high-interest rates, which can put a strain on the finances of private companies.

Investors need to carefully consider the terms of private credit investments and ensure that they are fair and reasonable for the companies they are investing in.

They should also consider the long-term impact of their investments on the companies and the wider society.

Overall, private credit investments can have both positive and negative social impacts. Investors need to carefully consider the social considerations of their investments and ensure that they align with their values. By doing so, they can help support the growth of SMEs and private companies while also promoting ethical and sustainable business practices.

The War in Ukraine and its Impact on Private Credit

The ongoing conflict in Ukraine has had a significant impact on global markets, including the private credit market.

According to an article by Fidelity International, less than a third of the companies covered by their analysts have any direct or indirect exposure to Russia or Ukraine. However, the situation is evolving rapidly, and investors must remain vigilant to the potential risks.

Oliver Wyman has identified ten watchpoints for financial services on the war in Ukraine, including the risks of managing a fast-moving and complex sanctions environment, tough decisions on onshore Russian footprint, challenges in liquidating or managing existing holdings of Russian securities, credit exposure to the Russian economy, and heightened cyber threats requiring elevated defences.

Santander highlights that Russia accounts for a much larger share of global commodity supply, and Ukraine is also a major supplier of agricultural commodities. Global oil prices have increased by 11%, and UK wholesale gas prices have increased by 40% since the invasion. In March, UK consumer confidence fell to its lowest level.

The Financial Times reports that the credit cycle is turning as the Ukraine war adds to inflation concerns. The conflict has disrupted supply chains, leading to shortages of goods and rising prices. This, in turn, has led to concerns about inflation and its impact on the wider economy.

In conclusion, the war in Ukraine has had a significant impact on private credit markets, with potential risks including exposure to the Russian economy, supply chain disruption, and inflation concerns. Investors must remain vigilant and stay up-to-date with the evolving situation to manage these risks effectively.

Fund Management and Pensions in Private Credit

Private credit has become an increasingly popular asset class for institutional investors such as pension funds.

As banks continue to retreat from lending, private credit funds have stepped in to fill the gap, offering attractive yields and diversification benefits.

Fund management firms have been quick to respond to the growing demand for private credit. Many have launched new funds focused on the sector, while others have expanded their existing offerings.

According to a recent report by Private Equity Wire, target allocations to private credit among pension funds are now in double figures, with direct lending remaining the standout strategy as interest rates rise.

Pension funds have been attracted to private credit due to its potential to generate higher returns than traditional fixed income investments, while also providing diversification benefits.

Private credit investments can include direct lending, mezzanine debt, distressed debt, and other forms of credit.

However, investing in private credit does come with risks. Private credit investments are illiquid and can be difficult to value, making it essential for investors to conduct thorough due diligence before committing capital. In addition, the lack of transparency in private credit markets can make it challenging for investors to assess the risk of their investments.

Despite these challenges, private credit remains an attractive option for pension funds looking to generate higher returns in today's low-yield environment. As the sector continues to grow, fund managers are likely to launch new products to meet the increasing demand from institutional investors.

Tax Implications in Private Credit

Private credit funds have become an attractive source of financing for businesses in the UK, but they come with their own set of tax implications. Understanding these implications is essential for investors and borrowers alike.

Taxation of Interest Income

One of the main tax implications of private credit is the taxation of interest income. In the UK, interest income is subject to income tax, and private credit funds are no exception.

Investors in private credit funds will need to pay income tax on the interest income they receive from these funds.

Withholding Tax

Another important tax implication of private credit is withholding tax. Withholding tax is a tax levied on income (interest, dividends, royalties, etc.) earned by non-residents of a country. In the context of private credit, withholding tax may be levied on interest income earned by non-UK residents.

VAT Implications

Value-added tax (VAT) is another tax that may have implications for private credit. VAT is a tax on the value added to goods and services at each stage of production and distribution. In the context of private credit, VAT may be levied on fees charged by private credit funds to borrowers.

Taxation of Capital Gains

Private credit funds may also generate capital gains, which are subject to capital gains tax in the UK. Capital gains tax is levied on the profit made from the sale of an asset. In the context of private credit, capital gains tax may be levied on the profit made from the sale of loans or other debt instruments.

Private Credit in Your Inbox

Stay up-to-date with the latest news and developments in the private credit market with a subscription to industry newsletters and publications delivered straight to your inbox.

Here are some of the top options:

• Private Debt Investor: This publication covers the global private credit market, providing news, analysis, and data on fundraising, deals, and trends. Subscribers can choose from a range of newsletters, including daily news briefings and weekly roundups of industry news and analysis.

• Alternative Credit Intelligence: This publication focuses on the alternative credit market, including private debt, direct lending, and distressed debt. Subscribers receive daily news updates, as well as in-depth analysis of market trends and interviews with industry leaders.

• Creditflux: This publication covers the credit markets, including private credit, structured credit, and credit derivatives. Subscribers receive daily news briefings, as well as weekly and monthly publications with analysis of market trends and data on fundraising and deal activity.

• PEI: This publication covers the private equity industry, including the private credit market. Subscribers receive daily news updates, as well as in-depth analysis of fundraising, deal activity, and market trends.

In addition to these publications, many industry associations and conferences offer newsletters and email updates to keep members informed of the latest developments in the private credit market.

Subscribing to these resources can help investors and industry professionals stay informed and make informed investment decisions.

Conclusion

Private credit markets in the UK have been thriving despite the uncertain economic outlook and the COVID-19 pandemic. The demand for private credit from borrowers remains high, and investors continue to look to the potential benefits offered by short-dated private credit assets.

The changing landscape for private credit investing has led to a multi-faceted role for private credit in helping to finance the post-pandemic recovery and supporting changes to drive a greener, more sustainable, and fair recovery for current and future generations.

Rising rates may increase private credit's appeal, as investors seek higher yields in a low-interest-rate environment. However, investors should be aware of the potential risks associated with private credit investments, such as liquidity risk, credit risk, and operational risk.

Overall, private credit markets are likely to continue to thrive in the UK, with high demand from borrowers and investors, as well as a changing economic landscape that presents opportunities for private credit to play a critical role in the post-pandemic recovery.

Private Equity News UK - Frequently Asked Questions

What are the top private credit firms in the UK?

There are several top private credit firms in the UK, including Alcentra, Ares Management, BlueBay Asset Management, and Pemberton. These firms provide funding to UK businesses through private credit, which is also known as private debt, direct lending, or private lending. Private credit has become more vital to UK businesses in recent years.

What are the benefits of investing in private credit?

Investing in private credit can provide several benefits, including higher yields than traditional fixed income investments, diversification from public markets, and the potential for lower volatility. Private credit also allows investors to support UK businesses by providing them with much-needed funding.

How has the private credit industry performed in the UK?

The private credit industry in the UK has performed well in recent years, with strong demand from borrowers and investors alike. According to a report by the Alternative Credit Council (ACC) and the British Business Bank, private credit managers provided £6.4bn in funding to UK businesses in 2019.

What is the outlook for private credit in the UK?

The outlook for private credit in the UK is positive, with continued demand from borrowers and investors. The ACC and British Business Bank report also noted that private credit managers are optimistic about the future, with 88% expecting to maintain or increase their lending to UK businesses in the next 12 months.

What are the criteria for winning a Private Debt Investor Award in the UK?

The criteria for winning a Private Debt Investor Award in the UK include demonstrating excellence in private credit, innovation, and impact on the industry. The awards are judged by a panel of industry experts and recognize the top performers in the private credit industry.

Private Credit News UK