Sponsored Q&A: Funding Circle is the leading SME loans platform in the UK, US, Germany and the Netherlands, with over £8bn lent through the platform to 77,000 businesses. With mandates awarded from both local government treasurers and the Merseyside Pension Fund, chief capital officer Sachin Patel sets out the case for investing in the smaller end of the credit market.
Sachin Patel (SP): Through Funding Circle’s private direct lending fund, local government treasury and pension investors have the opportunity to earn an attractive, risk-adjusted return by lending directly to SMEs
Investors are typically well-versed in mid-market corporate loans through private credit fund managers who lend to businesses. These are loans of £10m all the way up to a loan of £100m to a private equity backed company.
That’s a well-trodden path and local government investors, particularly on the pension side, have quite rightly looked to tap the illiquidity premium there.
However, the issues we address are the lack of diversification and scheduled principal repayments. Most managers offer variations on a theme, that theme being large, mid-market corporate loans, often with no principal amortisation and loan concentrations in a portfolio of 2-3%.
https://www.room151.co.uk/treasury/sponsored-qa-funding-circles-sachin-patel-on-investing-in-sme-loans/