Despite financial and political risks and the COVID-19 pandemic, the appetite for Infrastructure Investing continues to rise. Increasing population, aging transportation, outdated data centers and the availability of more efficient green technologies highlights the need for infrastructure investment. Healthy infrastructure has a huge impact on global communities’ ability to thrive and for local economies to prosper. While it seems that managers have been successful in raising funds, deployment has been slow for many managers.
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COVID-19 and the resulting work-from-home (WFH) mandates have all but eliminated the benefit of maintaining in-house investment operations. This benefit is often described as control: the ability to “look over a shoulder” to ensure operations are running smoothly and issues are resolved quickly. Unfortunately, in-person control is no longer an option.
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Onboarding new customers challenges asset and wealth managers globally. Manual processes for Know Your Client (KYC), anti-money laundering (AML), Countering the Financing of Terrorism (CFT) and sanctions screening checks on investors and distributors can lead to compliance failures resulting in fines, criminal sanctions, or even jail terms.
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Recent growth in credit-based investment strategies can largely be attributed to changes in behavior following the 2008 financial crisis. In response to constraints on bank lending as a result of the crisis, borrowers began to seek capital directly from investors. The market for private credit (or private debt) more than tripled in the decade following the crisis, with significant growth in the Collateralized Loan Obligations (CLOs) market as well.
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Closed-End funds may not be fully aware of the latest requirements resulting from the new Cayman Islands Private Funds Law 2020 (PF Law or PFL). To date, private funds have been exempt from registration with the Cayman Islands Monetary Authority (CIMA). The PF Law commenced on February 7, 2020, and created a regulatory regime for closed-end funds, such as private equity, venture capital, and private debt funds. Although many of the requirements under the PF Law are similar to the existing requirements for open-ended funds, there are some additional operational features contained in the PF Law which managers also need to address.
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The end of LIBOR is imminent and we are beginning to see significant volumes of new issuances of both derivatives and cash products referencing risk free reference rates (RFRs). The LIBOR transition period, which terminates at the end of December 2021, is designed for market participants to prepare themselves operationally, technologically and financially for the cessation of LIBOR. With less than one and a half years to go, there are still many questions regarding documentation, fallback language, standardization, term rates, spread application, lags/lookbacks, lockouts and more. Nevertheless, market participants must be able to accommodate both LIBOR and RFR-based transactions during the LIBOR transition period.
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SS&C recently participated in an online panel with IMN to discuss tranched loan workouts, forbearance and restructuring. Topics included lender strategies for defaulted loans and managing mezzanine loan foreclosures.
As the panelists pointed out, the mezzanine holder is sandwiched between the mortgage holder (Lender) and equity holder (Borrower), so the rights and limitations of this structured debt are governed primarily by the intercreditor agreement. The ability to constructively interact with the mortgage lender for any remedies is essential for maximizing returns on mezzanine debt.
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European regulators expect fund management companies doing business in the EU to have effective governance practices. Effective governance means having an active management team that has a firm grasp of its business, and engaged directors who are diligently exercising their oversight responsibilities. In Ireland, these principles are captured in the Fund Management Companies (FMC) Guidance issued by the Central Bank of Ireland (CBI), usually referred to as “the Guidance,” or “CP86.”
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