VIDEO LINK https://youtu.be/onUil81ghoU
WITH an increase in the rate of inflation and higher interest rates in 2022, cash deposit-based investments appear to be returning as an attractive fixed income investment for many investors.
However, Henwick Park Distribution (HPD) have been researching the alternative ‘fixed income’ market over the past twelve months or so. They have found that both in the UK and globally there seems to be an increasing demand for finance and credit in this market from SMEs, who have struggled to obtain what they have needed from the traditional banking sector. Additionally, there seems to be an ever-growing number of investment vehicles, with many seeking fund structure, designed to fill the gap.
In the above respect, there has also been an awareness among institutional and professional investors that there are attractive alternatives to the traditional cash and fixed income opportunities. How this will play out in 2023 with higher interest rates remains to be seen, although many commentators are predicting that inflation has peaked.
HPD carry out various marketing roles for both UK and overseas clients, with a database of around 8,000 regulated professional advisers, including wealth managers, family offices, pension funds and trusts. One key focus is fund raising for asset management companies in the UK and globally. At any particular time, HPD will be representing clients in various sectors and asset classes e.g. they are currently representing a Swedish property firm, a UK small cap fund and an alternative investment financing agri-renewable plants in the UK.
Before agreeing to represent a client, HPD carry out comprehensive due diligence of the fund or product in question. They also establish with the potential client the target advisory market, jurisdictions and often the most appropriate regulatory domicile and structure. ‘We have certainly been approached by a fair number of alternative finance propositions in the past year or so’ says Mike Owen, Business Development Consultant at Henwick Park. ‘Issues like the credit worthiness and risk profile of the SMEs requiring finance are as paramount as the anticipated rate of return for the investor being advised by the professionals we approach. Of course, it goes without saying that the status and credibility of the depository involved, needs to be assured’ states Mike.
Recent examples of propositions in this sector include:
- Trade receivables in a Latin American country. In this case the SMEs are suppliers to blue chip global companies, who are the debtors. Invoices issued to these companies will be paid in advance by the fund to the SME at a discount (this provides the return to the investor). This will only occur after rigorous risk profiling of the SME, including a historical examination of previous invoices raised and the payment outcome. In this particular country, the tax regime enables the fund to track and control the payment process.
- Other possibilities include funds in under-developed areas such as Africa, green or social housing funds, coming under the ESG category. “Some countries have got the backing of the UN and other such organisations for their economies to be boosted by finance,” Mike says.
To watch a webinar interview with Mike, please click visit https://youtu.be/onUil81ghoU
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