Schroder Investment Management has acquired a 25 percent stake in Netherlands-based direct lending firm NEOS Business Finance.
The Dutch firm will provide advisory services to Schroders on the management of its investments in connection with financing small-to-medium enterprises (SME).
NEOS was established in 2012 and is an alternative debt financing platform that specialises in connecting institutional investors with Dutch SMEs seeking finance. NEOS issues standardised loan terms to SMEs requesting finance. The firm launched MKB Impulsfonds investment fund last year, targeting €500 million. Two major Dutch pension funds, Wonen and Detailhandel, have committed to the fund.
Philippe Lespinard, co-head of fixed income at Schroders, said that it has entered the SME direct lending market because SMEs are asking for alternative avenues for finance as banks “face increasingly onerous capital requirements on loans perceived as risky by regulators and supervisors”.
“Sophisticated institutional investors are becoming more familiar with the concept of providing growth financing to SMEs in return for higher yields than are available in the public markets,” he added.
Both Michel Vermeulen, Schroders country head for Benelux, and Boudewijn Jansen, business manager fixed income at Schroders, will join the NEOS board.
Quirijn Haak, chief executive of NEOS, said there is a big opportunity for direct lenders in the SME market as SMEs make up a high proportion of businesses in Europe. Banks have always been the major supplier of financing for SMEs, but that is changing as restrictions on banks means more opportunities for direct lenders, said Haak.
Schroders is an investment firm that holds £313.5 billion ($443.4 billion; €390 billion) in assets under management as of 31 December, 2015. Its investment vehicles have raised capital from pension funds, banks and insurance companies and the firm operates in 38 offices across the world.