This form of debt finance is provided directly to mid-sized UK companies, with typically a solid credit profile and a desire to diversify their sources of funding beyond traditional bank loans.
Direct lending has the potential to offer stable, floating-rate returns, as well as protections such as comprehensive covenants and often high levels of security against company assets. It aims to capture illiquidity and complexity premia and, by lending to companies that do not issue publicly traded bonds or sign syndicated loans, offers opportunities to diversify portfolios.
Our traditional direct lending capability typically seeks to provide senior secured loans, which are cashflow-based loans. We were the first investment manager to launch an institutional direct lending strategy of this type in the UK, in 2009.
Since then we have grown expertise in asset-based mid-market direct lending. This, in contrast to typical cashflow-based loans which are repaid from a company’s cashflows, provides loans secured against specific assets or receivables, essentially enabling borrowers to access flexible finance well-matched to their business. Asset-based lending offers investors attractive returns and access to a wider spectrum of direct lending, strengthening the potential for diversification and protection from security over assets.
Today, direct lending investments form part of our outcome-oriented credit strategies, such as illiquid multi-asset credit but can also be offered as a stand-alone strategy on request.