The message is loud and clear: credit is tough to come by these days. Last month this magazine reported on the increasing number of mid-market firms underwriting their own debt to get deals done. Now Investec Private Bank, a group that pitches itself as an investment bank for private clients, has identified a niche area of lending. By providing finance to private equity GPs (to be put to whatever use the GP sees fit), it feels it has hit on a major growth area for the bank.
The private equity partner and fund finance service was formally launched in September, but has been piloted since the beginning of the year. The team typically lends up to £25 million to private equity GPs secured against the private equity investments, management company cash flows or investor commitments. GPs have so far borrowed cash for a number of reasons, including buying interests from distressed LPs, investing in their own funds and buying stakes in their own management company.
Investec's Simon Hamilton says the bank does not have any set parameters for lending. “We don't go out with a product set,” he says. “We go out to GPs and say ‘we are a value creation team: we provide finance to allow you to create more wealth’.”
In the current climate, with income from carry being a more remote prospect for many professionals, Hamilton sees the need to attract and incentivise staff as a growing driver for GPs looking to borrow cash. “This will be one of the key agenda items over the next 18 months,” he says.