Alternative managers are providing liquidity in a time of crisis
22 April 2020 - In the current environment, alternative managers holding illiquid assets – private equity, real estate, infrastructure, and credit – are understandably under considerable stress. We have seen a significant (approximately 40%) increase in capital advisory and lending activity over the past month, as we assist clients in structuring more stable, long-term financing for their portfolios.
Why is this happening? Some clients are choosing to replace their repurchase facilities with longer-term financing, more befitting the long-dated nature of the assets in their portfolios. Others seek to obtain new credit facilities, thus generating liquidity to take advantage of market dislocations and manage increased risk.
Interestingly, we are seeing limited partners – such as pensions, endowments and family offices – increase their allocations to alternative managers. This is in contrast to the Global Financial Crisis (GFC), when these investors as a group withdrew capital from alternatives. During the current turmoil, alternative managers as well as their investors are taking an opportunistic approach: across the risk spectrum, long-term, patient capital is the de facto liquidity provider of last resort.
For those managers who believe the current crisis contains opportunities similar to 2008, our capital markets team will either lend directly where we can or structure credit from a trusted third party. We also lend to and advise investors in alternative managers, and support foreign exchange hedging at either the fund or portfolio level.
The Citco Group Limited and its affiliates has a 60+ year track record in financial services as well as a 20+ year track record in alternative fund finance. In difficult times, we strive to be a pillar of support for our clients.