Month: July 2018

Issues

Issue 7 2018

Click the image below to read this months issue!

Wealth & Finance INTL Magazine is dedicated to providing fund managers, institutional and private investors from around the globe with the very latest industry news from across both traditional and alternative investment sectors.

Firstly, we cast a light to Allied Wallet who graces the front cover of this edition. Taking time out of hectic schedule, Dr. Andy Khawaja of Allied Wallet provides us with an insight into the company’s award-winning global online services following his recent success in Wealth & Finance’s Leaders in Finance Awards in which he was rightly awarded the title E-Commerce CEO of the Year.

In this issue, we take a closer look at Pros Assist, a gifted team consisting of qualified practicing members of the Institute of Financial Accountants, notably headed by the Director and Senior Financial Accountant, Alom Rouf. Recently, we profiled both the firm and Alom to discover more about the innovative services that they provide to their clients.

Also in this edition, we discover more about Eze Castle Integration who, for more than two decades, have been the premier provider of technology solutions to the financial and investment management industry. Recently, we profiled the firm and spoke to Dean Hill as we looked to discover more about their innovative ways, especially following their recent success in Wealth & Finance’s Global Excellence Awards where they were awarded title Best in Hedge Fund Technology Services.

At Wealth & Finance Magazine, we sincerely hope that you enjoy reading this month’s issue and look forward to hearing from you.

Why Direct Lending is so Attractive to Investors
Transactional and Investment Banking

Why Direct Lending is so Attractive to Investors

At a time when investment and wealth preservation is as challenging as ever, direct lending offers an alternative for asset managers looking to invest.

There is a growing trend for non-bank lenders to loan money to companies, cutting out the middleman. Indeed, institutional investment is now the direct lending in the UK as it has been seen as a way to source alternative finance and funding for a variety of industries.

Direct lending started in the UK in 2005 with consumers borrowing from other consumers. Today, borrowers have increased and widened across many asset classes and the types of lenders have also expanded.

Direct lending is often now used to describe P2P lending and this reflects the growing number of diverse lenders keeping up with the high demand from borrowers.

Direct lending offers an attractive investment opportunity, gaining:

– Higher returns than a savings account could
– Lower volatility than stock markets

Likewise, borrowers are attracted by the lower rates and quick loan decisions.

Why direct lend?

Other investment options aren’t as reliable as they used to be so it has become prudent to invest elsewhere.

Stock markets remain volatile and therefore now difficult to find a safe-haven for money.

Add to this the decreasing yields on the usual ‘go to’ investment products and savings accounts that now offer little return.

Furthermore, Q4 2017 saw inflation rise to 3.0% – with the ever threat of increasing inflation. 

Direct lending is also attractive when compared to other credit-grade investment choices:

A gap in the market was seized

Traditional banks have cut back on business lending in recent times, especially to SMEs, as tighter regulations have changed the post-financial lending culture. These tighter regulations aim to reinforce bank capital requirements and reduce leverage.

This has created an opportunity for alternative lenders and this gap in the market is being seized by investors who are offering loans to mid-market companies as an answer to low-yield problems.

Direct lenders can work under more favourable circumstances, therefore taking on the companies with high leverage simply because they don’t have to adhere to capital requirement guidelines. This results in more attractive returns for the investor.

Direct lending isn’t a passing fad

Direct lending was relatively untapped until recently, but research by the Alternative Credit Council (ACC) has led them to predict that global lending is expected to break the US $1 trillion mark by 2020.

The UK direct lending market is substantial and has grown considerably in recent years – with plenty of room for direct lending to continue to grow further.

The UK direct lending market accounted for £4.5 billion of lending in 2017 – this is an increase of 21% in a year.

Europe is catching up

In 2017, European direct lending grew to around US $22bn, alongside the growth of mergers and acquisitions amongst SMEs. With SMEs seeking alternative ways to finance this growth the two are intrinsically linked.

Institutional lenders now account for more than half of the direct lending in the UK – yet the UK media still remain skeptical about the industry. One of the reasons for this is that direct lending is often mistakenly confused with equity crowdfunding in the media.

Direct lending is much more established in the US and Asia and Europe is set to follow. In fact, shrewd P2P investment is helping clients who may not be able to get finance from banks and this in turn is injecting sluggish economies.

The borrowers benefit from loans that are secured and have straightforward and open arrangement fees from the start.

In turn, investors have the potential for attractive yields, low volatility and low correlation compared to other asset classes:

European direct lenders are teaming up to chase bigger deals and more high-profile firms. For example Zenith Group Holdings Ltd and Non-Standard Finance Plc used direct lenders to meet their financial needs.

An increasing number of investors

Direct lending started with asset managers lending to mid-market companies and therefore filling in the gaps left by the banks. Now other types of companies such as P2P platforms are joining in and taking up the market for smaller loans, while the asset managers have the expertise for the larger loans – creating an even more prosperous and thriving investment climate.

In fact, in 2017 there were more than one hundred direct lending platforms facilitating more than £4.5 billion of lending.

In turn, fund managers can offer bigger loans as the money flows, making direct lending more attractive with potential for returning clients.

Untapped potential

There is plenty of untapped potential from retail gatekeepers who have yet to wholly embrace direct lending:

Are there any downsides to direct lending?

The extra leverage that makes direct loans more attractive to a borrower, is also a higher risk to take if the economy takes a dive.

The need for direct loans grew from the banks refusing businesses simply due to tightening of restrictions – these were safe and dependable businesses that were suddenly cut off when previously they wouldn’t have had a problem. However, due to a more competitive and growing direct lending market, a growing number of direct lenders seek out the higher-risk financing to companies in trouble.

What does the future hold?

The rate of growth in the direct lending market is slowing, but this is all for the greater good as a ‘flight to quality’ is predicted as better lending platforms outperform weaker or less scrupulous ones.

However – there is still plenty of room for growth long term as reflected in the forecasting statistics.

In 2018, there will likely be an increase in collaboration between direct lenders and traditional lenders – they will complement each other – with banks seeing direct lending as a source of capital.

Another factor will be the concept of open banking which is spreading with a ripple effect across the financial world. For example, the UK’s Open Banking Initiative promotes the use of open application programming interfaces (APIs) to provide access to bank customers’ transaction data. This is certainly something to watch in the future with regard to how direct lenders can use this valuable data.

Direct lending will certainly experience change as it evolves in the coming years, but it is here to stay as an alternative investment opportunity which offers good returns – and ultimately it is uncorrelated and relatively liquid in comparison to other classes.

Exo Investing
Transactional and Investment Banking

Recent launch of Exo Investing

  • Launch of Exo leap-frogs existing online retail wealth management services in landmark moment in the democratisation of investment technology
  •  Exo’s unique use of AI offers investors  a truly individualised, adjustable ETF portfolio, daily risk management and absolute transparency, for a low online fee

It was confirmed today that the investment backing the development and launch of the ground-breaking ‘Exo Investing’ retail digital wealth management platform included a private investment from Benjamin and Ariane de Rothschild.  

This investment was alongside that from the founders of Madrid-based ETS Asset Management Factory who supply Exo with its Quantitative investing technology and capabilities and the former heads of the La Compagnie Benjamin de Rothschild SA, Daniel Treves and Hugo Ferreira, who is also the Chairman of Exo Investing.   

The launch of Exo Investing earlier this year saw retail private investors gain access – for the very first time – to the same sophisticated AI-powered Quantitative investment and risk management technology developed over 30 years by quantitative investment manager ETS for institutional investors and the wealthy clients of Private Banks.

Acting as an expert ‘investment co-pilot’,  Exo’s use of AI sets  it apart from even the most sophisticated of the existing robo-advice platforms, introducing new standards of control, personalisation and risk management.

Moving away from the traditional model of static products and predefined portfolios, Exo instead builds each investor a personal, adjustable portfolio of ETFs based on their own investment preferences. Each portfolio is then monitored 24/7 and recalibrated as frequently as daily to both the individual’s risk appetite and changing market conditions, continually managing each client’s long term risk.

Lennart Asshoff, CEO of Exo Investing said“This investment paves the way for Exo to continue developing this ground-breaking solution for the retail market. Opening the door for thousands of private investors to the important benefits that Quantitative investment science offers is very satisfying having seen what a pivotal difference it can make to investment outcomes during my years working at ETS.

“This level of individually tailored portfolio and risk management has never been available to the retail investor before.  The wider public have never been more reliant on their personal investments for their future financial security and we want to open the door to a new category of investing for as many people as possible,  making truly personalised investing available at scale.”

Hugo Ferreira, Chairman of Exo Investing said“Exo Investing is an exciting example of how the latest advances in technology – from artificial intelligence to the growth in computing power available through the cloud – can be utilised to democratise access to the best services available. For years we have wanted to find a way to provide the huge financial advantage that ETS’s systems deliver to a much wider audience, and Exo is just that. The Fintech zone has a track record of democratising finance and we are proud of Exo as the latest and one of the more significant additions, this time in the increasingly crucial world of private investing.

“My long career managing risk for large organisations around the world has taught me that to successfully ride out market turmoil like the 1987 crash, the internet crises of 2001 and the sub-prime debacle of 2008, you need humility, discipline, transparency and risk control.  I found these in spades 20 years ago in the quantitative investing models developed by ETS.  Now Exo is utilising AI and recent  increases in computing power to offer the same portfolio management technologies to a far wider market and at a highly competitive price.  This is a watershed moment for the private investor.”      

With a potential market size of more than 3.2 million private investors in the UK,  and armed with an obviously superior yet competitively priced proposition,  Exo is set to shake up the existing online investing market significantly.  No existing platform, of whatever scale, offers the private investor so much for so little. As this fact becomes more widely known by the UK’s mass affluent market, Exo is set to  build enviable scale and accolades for transforming outcomes for the private investor.