The abundant resource of multitrillions of dollars is waiting to invest in viable projects
Over the coming months, we are going to emerge from global lockdown into an economy over which the Covid-19 virus will cast its long shadow. But does that have to be the end of the story?
It analysed how family offices, hedge and private equity funds had become so awash with liquidity that it was proving impossible to generate any meaningful returns for the private capital they were trying to deploy into the market. A trend that had been under way, according to thatBusiness Day readers will recall the fleeting appearance of the “shadow banking” sector in the wake of the 2008 crash.
Preqin, the font of all wisdom in the alternative capital sector, has 100,000 subscribers across every conceivable type of private capital entity. These are numbers that cannot be ignored and prove that, after a decade of growth and consolidation, the “shadow banking” sector has come to overshadow traditional banks. Irony lives.
Though fragmented, they comprise a vast and abundant resource of multitrillions of dollars, known as “dry powder”, waiting to invest in viable projects. Alternatively, an independent and credible feasibility study will sometimes be sufficient to secure finance for a transport, hospital, social housing or similar infrastructure project. This directly reflects how the capital markets work with credit agency-rated borrowers, where they lend against the rating and not the project sponsor or principals.
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