The number of asset managers engaged in direct lending has risen 120% in the last two years in Europe and the U.S.
Just don’t call it shadow banking. Whatever you call it, fund managers are stepping in where banks have stepped back, reports the Financial Times: 110 U.S. managers are lending money, up from 44 two years ago. In Europe, the number has almost doubled to 85 managers. Assets in the industry have tripled since 2006 to $441 billion at the end of 2014.
Regulators aren’t thrilled by the direct lending shift, saying that asset managers could lead to more problems for the industry. Even if it is a good idea for asset managers to pick up the lending slack, not many have the expertise needed. Writes the Financial Times:
Chris McChesney, head of alternative investor services at BBH, rejected these concerns. “The term shadow banking implies an unregulated environment. We are talking about non-bank lending rather than shadow banking, and a capital base that in some ways is more stable than loans backed up by bank deposits,” he said. “There is a fundamental change underway in [how] asset managers see themselves [in relation to] companies and borrowers. Companies are now borrowing from Blackstone [the private equity group] instead of HSBC [the bank]. It’s a redefinition of the role of asset managers and banks.”
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