By: Allvue Team
March 3, 2023
This February, our team attended and participated in the 12th Annual Global Fund Finance Symposium hosted by the Fund Finance Association. It was three days full of insightful conversations about the future of the fund finance industry and energizing new connections. Below are some of the key themes we heard popping up again and again at the Fontainebleau in Miami Beach.
READ MORE: 4 PRIVATE DEBT TRENDS TO WATCH IN 2023
#1: The continued rise of private debt
As an asset class, private debt only seems to be heading upwards. With high rates providing a significant tailwind, the continued increase in private credit/direct lending deals was a persistent theme.
As far as specifics within that rising tide, a number of managers and investors spoke to seeing fewer club deals and more direct solo deals. This is in part made possible by the size now of some of those players. It seems no exaggeration to say that large direct lenders are fast becoming the banks of twenty years ago.
#2: Subscription finance also continues to grow – for now
Subscription finance has also seen meaningful growth recently. Generally portrayed as a less risky asset type that can still provide good return for banks and other large investors, more retail and high-net-worth investors are looking to enter the space now as well. Growth has been so significant, in fact, that one of the questions we heard batted around was whether the asset class would hit a max capacity anytime soon.
There are potential headwinds, to be sure. Certain verticals will likely face some potential recession challenges, generally slowing capital deployment. And the regulatory burden is settling in as well. Regulators are already requiring banks to slice and dice data for compliance purposes. Additionally, should more regulation come in, regulatory capital rates could also limit growth.
These are among the reasons why, at Allvue, we believe having the right technology is so essential. As the space becomes more crowded and the regulatory burden potentially increases, technology will be essential for allowing managers to scale and capitalize on the opportunity here. It will provide a meaningful opportunity for managers to set themselves apart from their competition. As our own Alex Lambiotte put it:
“Most of the banks and sponsors we work with are still in Excel or on not-fit-for-purpose systems. Utilizing technology like Allvue provides the ability to automate multiple manual processes, such as calculating borrowing bases, viewing true exposure to collateral, and understanding the impact of new investors or collateral on the existing borrowing base. This allows teams to focus on value driven activities, instead of manipulating and cleaning data for Excel sheet consumption and reporting.” -Alex Lambiotte, Global Lead of Fund Finance – Solutions Engineering, Allvue
#3: An investment in community is an investment in the industry
Across the three days, there seemed to be collective realization from investors that it was essential to be involved in communities and to invest in workers – because, if they didn’t, that lack of investment would eventually come back around. Actualizing this came back to having an increased focus on ESG, especially as a way to take aim at wealth inequality and environmental issues. There was a recognition that an increase in the wealth gap leads to an increasingly unstable investment environment and that, in a space where some players have enjoyed outsized growth, those same players have a responsibility to help ensure everyone can prosper.
For many, the feeling was so strong that there was a desire to be proactive on the matter, pushing ahead rather than waiting for guidance from the government or increased regulatory requirements. Being proactive would allow investors to get ahead of the movement and help shape the narrative – and, for many, it also seemed the right thing to do.
Allvue empowers scalability and transparency
Allvue’s industry-leading solutions provide firms with scalability and much needed transparency, so that they can continue growing and capitalizing on these and other trends in the fund finance space. Growth brings its own set of challenges, like the risk of managing an increasingly large book in Excel. Allvue can provide managers with fund finance specific solutions, developed specifically to solve the needs of this burgeoning market. Schedule a demo today to learn more.
