Last year, private debt funds reached a nine-year high of almost $60 billion driven largely by fund launches in Europe.
But what factors are driving borrowers increasingly to choose alternative lenders, even when the banks and traditional lenders can offer cheaper deals?
In the decade following the financial crisis, traditional lenders took a cautious approach to lending, which has in turn led to a boom in the size and number of alternative lenders on the scene. Certainly, however, this is not the full picture and cost is not always proving to be the vital factor. Could being in the debt market be about more than just a pound of flesh?
Our latest research report would seem to suggest so. As well as exploring the advantages of alternative debt funds over traditional lending, the report also sets out the reasons why Jersey is often chosen by alternative lenders to domicile or administer debt funds.
At the last count, according to the Jersey Financial Services Commission (JFSC), Jersey infrastructure, credit and debt funds had risen almost £10 bn since January this year alone and one of the principal reasons for this could be the flexibility offered by the Island’s funds sector.
In the report, such flexibility was cited as a key driver for borrowers moving away from traditional lenders. In Jersey, the fact that alternative lenders can tailor their solutions to meet a borrower’s needs is an attractive proposition for many corporates and, when coupled with expertise in navigating the complexities of tailored lending, it’s certainly easy to see why the Island would prove to be attractive.
What is more, Jersey can offer an optimum regulatory environment, especially when time is of the essence. A forward-thinking approach, such as that seen through the development of our Jersey Private Fund, which can be launched in as little as 48 hours for up to 50 investors, is no doubt a significant draw - so much so that we’ve seen 167 formations in the 18 months since the product was launched. Such proportionate and responsive regulation can also reduce costs to investors when compared to other jurisdictions and has been recognised by the 2018 TMF group Financial Complexity Index, which ranked Jersey as the third least complex jurisdiction globally.
I could go on; Jersey’s established access to European markets and ‘no change’ proposition in terms of Brexit are topics that I have discussed at length in these pages, but I hope you’ll take the time to check out the report instead.