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Direct lending strategy gets $200m in institutional capital

UK-based Prestige Funds has attracted several foreign institutional mandates, including one from Asia, for its direct lending strategy in the past 12 months, according to the firm.
Farmer Types on tablet computer with combine havester in the background

The foreign investors include a South Korean financial institution, a Swiss corporate pension fund and a Spanish university endowment fund. The firm did not name the entities.

Based on a previous announcement in February, when Prestige said it had raised around $1.3bn in assets, the new mandates amount to around $200m. The firm does not report the AUM of its funds.

The firm specialises in direct private loans to UK-based companies, focusing on two strategies. Its team based in Cambridge lends to small companies in the agriculture sector, with a focus on project finance and asset finance. Its second team, based in London, provides short-term invoice and cashflow finance. The firm said it had made almost 15,000 loans to 6,000 clients since it launched.

The strategy “is increasingly being viewed by some institutional investors as an asset class in its own right”, said Craig Reeves, founder of Prestige, in a statement.

He believes institutional investors are attracted to the fund’s exposure to “areas of the market neglected by traditional lending institutions and the diversification of risk across hundreds of individual loans”.

Lending to UK’s farming industry, which is “asset-rich and cash-poor” fills a niche left by banks hesitant to finance expensive modern equipment, while the industry is under pressure to become more efficient, Reeves said in a previous interview. The biggest opportunities are in the areas of energy, waste management and productivity, he said.

In this strategy, Prestige differs from US-based Voya Investment Management, which also has a strategy focused on loans. However, Voya’s products invest in syndicated and actively-traded senior loans of US corporations, rather than making direct private loans to small and medium businesses.

Since its establishment in 2008, Prestige has raised around $1.5bn, according to the announcement. It currently manages $875m in assets.

The firm noted that it continued to see interest from institutional investors for its private lending funds, including pound sterling-based share classes, despite the outcome of the Brexit referendum and the ongoing Brexit negotiations.

The Prestige Alternative Finance Fund (USD) had three-year cumulative return of 17.2%, and a five-year return of 31.81% in US dollars. The fund significantly outperformed its FE category of hedge/structured products over both periods.

The fund is priced monthly and offers only monthly liquidity at a 30-day notice.

The fund’s target annual capital appreciation is 5%-6% in sterling, as per its factsheet.

Monthly returns in 2016 and the first three quarters of 2017 were steady, between 0.38% and 0.46%, in sterling, which added up to a 5.51% return in calendar year 2016 and a 3.79% return in the first three quarters of 2017, according to the fund factsheet.

Three-year performance of the Prestige Alternative Finance Fund vs category average

Data: FE, all returns in US dollars

Part of the Mark Allen Group.