Fund finance is entering an era of change. Recent market volatility is symptomatic of a global economic shift, with inflation rising to levels not seen in a generation and higher interest rates. At the same time, the sustainability agenda is becoming ever more urgent, both for our environment and for financing itself. Writes Simon Watkins.
After years of rapid growth, fund finance must adapt to address these challenges and meet the demands of funds for greater flexibility and sophistication.
This report investigates these issues through a panel discussion of specialists and an analysis of the issues, including in-depth interviews with sector experts. The overwhelming conclusion is that fund finance faces a bright future, but one in which it must and will evolve.
Sustainability is becoming an embedded feature in fund finance. Those that wish to make their ESG credentials a core dimension of their fund need to address the issue at the outset and do so with rigour and meaningful metrics.
Meanwhile, the development of innovative forms of finance is expected to accelerate. This trend is already underway with the recent rise in net asset value (NAV) financing, and it will continue as funds become more complex.
The sources of finance are also set to increase as new entrants, including major institutional investors, look to expand their fund financing activities.
This report delves deeper into these trends, but these factors all point to a new landscape for fund finance – one of closer and longer-term relationships. Finance providers must become partners to their fund clients, working together on sustainability and creating more sophisticated and flexible solutions.
Such a partnership approach will ensure both that fund finance continues to grow and that it continues to deliver ever greater value to the funds industry.
© 2023 funds europe