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We do not need further rules as AIFMD
already covers alternative lenders.”
JIRI KROL, HEAD OF REGULATORY AFFAIRS, AIMA
this is that shadow banks, such as certain
asset managers, are looking to capitalise on
banks’ retreat. So to what extent are fund
managers becoming banks?
Banks have curbed their SME lending as
they seek to de-risk. Private credit – often
alternative asset managers – is gaining
momentum in the SME lending space. Assets
in private credit stood at $560 billion in
2016, an increase from $440 billion in 2015.
The US is still the biggest market for private
credit although Europe is catching up, ac-
cording to a study published by the Alterna-
tive Credit Council (ACC), an affiliate group
to the Alternative Investment Management
Association (AIMA), a hedge fund indus-
try body. Efforts are being made in the EU
>>>
ASSETS IN PRIVATE CREDIT
<<<
$560
BILLION
$440
BILLION
in 2016
in 2015
78
TheTrade
Spring 2017
M A N A G E R S
S I F I s ? ]
to increase funding from non-banks, most
notably through the creation of the Europe-
an Long Term Investment Fund (ELTIF), a
product open to retail investors looking to
gain exposure to infrastructure, real estate
and private loans.
Additional rules
The loans being underwritten by alternative
lenders are not insignificant. The ACC paper
said the majority of loans were for more than
$5 million, and half were in the $25 million
to $100 million range. The SMEs seeking
these loans are usually organisations which
have been refused credit lines by banks, or
who need greater flexibility or urgency in
obtaining credit. The EU alternative lending
space is still relatively small but regulators
are evaluating whether rules specific to
credit funds should be created in addition
to the Alternative Investment Fund Man-
agers Directive (AIFMD). Loan issuance at
fund managers is unlikely to warrant a SIFI
designation, but it could result in heightened
regulation. Some EU member states such as
France and Italy have allowed fund man-
agers to extend lines of credit to SMEs but
there is a risk this could lead to new rules
being introduced.
Jiri Krol, head of regulatory affairs at
AIMA, said alternative lenders should
not be subject to additional rules over and
beyond that of AIFMD. “Buying bonds in
the primary market is not subject to specific
regulations, and I do not see why alterna-
tive lenders need to be treated as radically
different. AIFMD is flexible about what
managers can invest in, and this includes
loans as assets. We do not need further rules
as AIFMD already covers alternative lenders
and provides one of the most robust frame-
works globally,” said Krol.
Other areas of banking are also being
encroached upon by revenue-hungry fund
managers. The reluctance of banks to pro-
vide financing or lend out securities to the
buy-side has even led to some cash-heavy
fund managers integrating financing or secu-
rities lending operations into the burgeoning