By Daniel Lanyon on Wednesday 10 May 2017
The manager of the recently launched direct lending investment trust is optimistic the alternative credit market can benefit from broader volatility.
The fast growing market for direct lending could see a boost owing to an on going spike in political uncertainty, according to James Robson, head of direct lending at of RM Capital.
In recent months markets have become somewhat of a rollercoaster for investors with public equity markets rallying to all time highs.
Nonetheless, the spectre of a ramp up in volatility has risen with many commentators pointing towards the on-going political risk whether it be from the unpredictable policies of the Trump Administration and/ or the the uncertainty of Brexit negotiations.
For Robson, however, who manages the RM Secured Direct Lending investment trust, this trend could be a a boon to performance.
“Volatility and various external events that are going on in the world right not could be benefical. The more uncertainty there is, the more beneficial it is to our strategy.”
“What it means is that as every day we are competing with other capital providers and typically our loans are substitute loans for what they need, they might be being offered money from a platform or a bank or any other funding provider.”
When you get these periods of uncertainty, he adds, and money comes out of the market it allow players in the alternative lending market to be more aggressive with pricing.
“These events are things we can capitalise on. They area most susceptible to risk is property and house prices and part of our portfolio is to bridging lenders.”
“This environment gives us the ability to reduce our loan to value exposures and potentially increase our pricing. Also, it gives us more opportunity to structure the investment to make it more secure for our investors.”
Launched back in December 2016, the RM Secured Direct Lending fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investment and is seeking to raise more capital in the coming months due to a strong pipeline of oppurtunities.