February 03, 2020
Jeremy Cross comments on why insurers are looking to grab a slice of the fund finance market.
An excerpt from "Why Insurers are Flocking to Fund Finance," Private Debt Investor, February 3, 2020:
Jeremy Cross, a partner in the London office of law firm Cadwalader, acknowledges that fund finance is well suited to the insurance market, even though it's not of a long-term nature. "It's quite a short-lived product, maybe two or three years. But it provides a pretty steady return, which suits insurers well. There is much less fluctuation than in something like leveraged finance."
With GP facilities also muscling into the fund finance market alongside asset and hybrid finance, Cross says there has been an "explosion" of new entrants over the last four or five years. "It's unusual now to find a bank that doesn't do it. It's commoditised, and price is a big factor in winning deals, but also operational capability. Not all providers are equally accomplished at the back-office level."
Although there appear to be no brakes on the fund finance market, Cross says investors may have concerns about the use of multiple layers of leverage. "How much is it a case of debt being stacked on debt? When you get as far as the GP level, it could be that you have as much as three or four layers of debt on the same asset."
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