Direct Lending Investments, which specialises in investing in non-bank lenders in the US, has launched an offshore vehicle making it easier for European investors to tap into opportunities across the Atlantic.
The firm describes itself as a non-bank lender, which extends credit facilities to other alternative lenders in the US marketplace, sourcing returns through what Brendan Ross, chief executive at Direct Lending Investments, said is a “regulatory premium”.
“It used to be that banks would support non-bank lenders, but we’re stepping in and providing the financing. We’re a non-bank, just like our clients, but we like steady returns and the lenders to bear the risk,” Ross told PDI.
He added: “The regulatory premium is not a risk or illiquidity premium – it’s a premium that comes from the decline of bank lending in the US. It’s a regulatory premium that will persist straight through a recession.”
Through the Cayman Islands offshore vehicle, European investors can commit to the tax-friendly vehicle enabling them to increase their exposure to the US market. More and more institutional investors in Europe are looking at the alternative lending market in the US in their search for yield, said Ross.
Established in 2012, the firm has around $800 million of assets under management. Lenders that the firm has invested in include CarePayment, a provider of healthcare finance to individuals, and QuarterSpot, a provider of small business loans.
Ross explained that investments are directed towards lenders with a proprietary deal flow, operating in the spaces where the traditional banks refuse to lend.
The firm declined to outline the returns achieved by the fund, but information provided by a market source outlines that returns between 2013 and 2015 were in the double digits, ranging between 11 and 13 percent.
Overall, the firm is aiming to provide a total of $2 billion in capital to alternative lenders by the end of 2017.