Hedge fund managers in the U.S. and Europe are “playing a crucial role in financing the real economy,” reported a research paper released Wednesday by the Alternative Investment Management Association.
The global financial crisis and related post-crash bank regulation has reduced lending to private companies, particularly in Europe where nearly 80% of lending is bank financed, compared to the U.S. where 80% of corporate lending is done through capital market issuance of stocks and bonds, AIMA's paper, “Financing the Economy,” showed.
There was a “significant rise in alternative asset managers jumping in to bridge the financing gap via non-bank lending,” according to the paper, which said more than 350 direct lending transactions were completed in Europe by 36 alternative lenders in the two years ended Dec. 31. The pace of deal flow remained strong with volume growth of 43% in 2014, compared to the previous year.
The number of private debt funds worldwide is on the rise as well with about 40 funds currently making direct loans mostly to small- to midsized private corporations, up from just 18 funds in 2012. Another 81 newly created direct lending funds have hit the market in 2015, seeking to raise their first $75 million of assets under management, AIMA's research showed.
The paper was written collaboratively by members of AIMA's Alternative Credit Council, which is chaired by Stuart Fiertz, president of credit hedge fund specialist Cheyne Capital International. Alternative investment companies with an aggregate $530 billion under management were surveyed in November and December to provide data for the paper.
