Portfolio Insight – Secure income
opportunities for companies accessing the private capital markets. This includes businesses looking to sure up liquidity to ensure that they can pay workers and sup- pliers or that important social and infra- structure assets have the additional capi- tal they need to meet their objectives.
Have you seen many public issuers turn to the private markets during the pandemic? If so, will this be an increasing trend with Brexit on the horizon? In short, yes. We have seen a number of utilities and consumer non-cyclicals ap- proach the private markets, the latter in- cluding healthcare and advisory firms to- gether with highly-rated housing associations and higher education institu- tions which have
access to public
markets. With respect to Brexit, I do not want to overplay that dynamic at this
stage
because Covid is almost certainly more influential across sectors and on the mar- kets. However, one of the things we have experienced over the past couple of years,
across a range of industries, is a reduction of UK-based international product manu- facturers and service companies, which will in various instances reflect a reduc- tion in leverage and reticence approach to the public and private markets with the trade uncertainty. We believe that a con- clusion to Brexit (or greater clarity, at least) will help to reignite issuance in these spaces, which have historically pro- vided a good proportion of market supply.
Are you seeing opportunities in the crosso- ver space, specifically digital technology and clean energy? Absolutely. We have seen a pick up recently, especially given the focus on sus- tainability and flexible working arrangements.
The crucial point in this space is to make sure that your finance is well structured. Needless to say, we have seen a number of live opportunities here. Additionally, the reduction in the size of bank balance sheets has given other insti-
For Professional Clients only.
tutional lenders, such as us, the opportu- nity to provide much needed capital to these nascent market sectors.
Can you tell us more about what impact Covid is having on secure income assets? From a credit perspective, since asset classes are not homogeneous, the effect of Covid will be sector and borrower spe- cific. Within real estate corporate lend- ing, for example, and in Reits, we have seen continued performance of logistics and distribution, healthcare and residen- tial together with the resilience of prima- ry office space, which are underpinned by high-quality tenants. At the other end of the sub-sector spec- trum, temporary office spaces, hotels and shopping centres have fared less well. The duration and intensity of the impact will ultimately be a function of the num- ber of waves that we have and the nature of the recovery, whether it is a V, W, tick or other shape. Hopefully, there will be the imminent discovery of a vaccine. Secondly, one of the important things we
Within private corporate markets, in the context of quieter markets generally, issuance picked up from May onwards.
26 | portfolio institutional September 2020 | issue 96
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