Global asset management firm forges a strategic partnership with Dutch direct lending firm NEOS Business Finance.
Schroders today announced the acquisition of a 25% stake in NEOS Business Finance, a direct lending firm in The Netherlands. As part of the agreement, NEOS Business Finance will provide investment advisory services to Schroders with regard to the management of investment funds of Schroders' clients investing in SME financing.
Founded in 2012, NEOS Business Finance is a Dutch non-bank financing platform that provides institutional investors with access to alternative debt investment opportunities. NEOS has developed a dedicated origination network consisting of leading accounting and advisory firms as well as banks. The business partners act as advisors to their client in determining their most suitable financing structure in consultation with NEOS. In addition, the platform works also with the largest Dutch bank ABN Amro to source SMEs in need of financing.
Quirijn Haak Chief Executive Officer at NEOS Business Finance said:
“The support of Schroders proves that direct lending to SME companies in a professional setting and based on quality analysis has become a good alternative for companies looking for medium sized loans. We are confident that the mutual commitment on which this relationship is based will provide a good basis for further cooperation and will benefit both existing and future clients. We also believe that the complementary skills and existing networks of the two organisations will lead to growth in this field of SME direct lending, which will benefit the SME businesses in local economies.”
Michel Vermeulen – Country Head for Benelux – and Boudewijn Jansen – Business Manager Fixed Income – will be joining the NEOS Business Finance board, representing Schroders. The asset manager admitted that small and medium enterprises in Europe are increasingly looking to obtain debt financing from non-bank lenders, since commercial banks are decreasing their supply of credit due to onerous capital requirements. In parallel to this trend, Schroders highlighted that sophisticated institutional investors are becoming more familiar with the concept of providing growth financing to SMEs in return for higher yields than are available in the public markets.
“We are excited at the prospect of matching the needs of our institutional clients with the innovative skills of a recognised leader in this growing marketplace,” said Philippe Lespinard Co-Head of Fixed Income at Schroders.
We can conclude that the recent arrival of big banks in the alternative finance space: (i.e. JP Morgan, Santander, etc.), is now being accompanied by the big asset managers – as exemplified in this move from Schroders into the direct lending space. At AltFi we increasingly see ‘online lending’ as a subset of a wider phenomenon that can be described as Alternative Credit. Investors, including institutions, are increasingly finding new ways of accessing credit assets directly. This is occurring both via the online lending platforms, that began as ‘peer to peer’ but are now increasingly facilitating institutional investment, as well as via institutional funding of direct lending businesses. The legitimate question that arises at this point is: why the Netherlands?
In a recent Euroview, AltFi reported on the current state of the Dutch Alternative Finance market. The research highlighted that the Netherlands ranked among the top five European countries in terms of volume of alternative finance transactions in 2014, with €78m, bested only by the UK (€2,337m), France (€154m), Germany (€140m) and Sweden (€107). 45% (€35m) of the total volume of €78m consists of P2P business lending – a 257% increase from 2013 when it was €18.2m.
But whilst online lending in the Netherlands is a new sector, and it may take some time for awareness of these fundraising and investment mediums to grow, the arrival of a high profile institution such as Schroders is likely to significantly accelerate this process.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.