Debt markets: Investors go private for protection
The buy side is turning to private placements, not only for yield, but also for protection when the cycle turns.
As banks worldwide continue to delever and withdraw from long-term lending, it is not only the capital markets that have moved to pick up the slack. The growth in private placement activity over the last five years has been dramatic, with an increasing number of corporates taking advantage of investor appetite for direct lending. And in a future of rate rises and the end of quantitative easing, private placements could become even more attractive for investors looking to protect themselves against potential volatility.
Given the severity with which European banks cut lines once the crisis hit after 2007, it is of little surprise that corporates have pursued the private markets so assiduously.
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“Prudential has been lending on a private basis for more than 70 years. Since the crisis our business has doubled,” says Marie Fioramonti, managing director and head of Pricoa Capital Group in London. Pricoa, the private placement arm of Prudential Financial, was one of the five original asset managers selected as part of the UK government’s Business Finance Partnership scheme in 2012, designed to stimulate non-bank funding to mid-market companies.