October 2, 2023


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Private lending funds: growth and challenges

There is no shortage of capital in this world. Real interest rates remain at or close to 0{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. Investors continue to struggle to find adequate yield in traditional fixed income investments. Consequently, we have witnessed a dramatic rise in the creation of, and investor interest in, private lending/private debt funds. Now more than ever, private debt funds and nonbank lenders need state of the art, innovative technology to support their private debt loan administration. According to a Preqin Quarterly update report on private credit dated Q3 2020, the number of private debt funds in the market has grown to a record high. As of October 2020, 521 vehicles were on the road seeking $295B in aggregate capital. Additionally, the number of funds in the market has grown consistently over the past five years and aggregate capital targeted has more than doubled since January 2015. (Preqin)

There are many reasons why we have seen such a surge in funds and investor interest in this asset class. The most notable has been the retrenchment of traditional banks following the 2008 Global Financial Crisis. Here, we focus on the operational issues facing this massive rise in such funds. Not only have record amounts of money been raised, but also, that capital has to be lent out in order to generate a return for investors. Loans of all kinds are being made, and interestingly, the funds are getting creative in the types of collateral they will accept.

‘The transactions and new opportunities range from refinancing existing debt to addressing margin calls, as well as finding investing opportunities. For example, one family office is looking to use a stake in a private company as collateral for liquidity to make investments in stressed and distressed situations in the private markets.’ – UBS Private Credit, Bloomberg April 16th, 2020

All of this requires sophisticated technology to handle the complexity and size of these loans. Are these funds prepared and what can they do?

Today, many lenders use confusing disparate systems, or worse, time-consuming manual processing. The lack of sophisticated technology can lead to inconsistent data flow, costly delays in communication, and data re-entry. Given the increased complexity in the nature of the loans and collateral being pledged, lenders increasingly are upgrading to a single solution for the entire life cycle of the loan. SS&C’s Precision LM loan management solution gives you everything in a single package.

  • Sophisticated tools for monitoring collateral and managing risk that help limit your exposure.
  • Fast, accurate, flexible reporting to internal and external investors, which means better, quicker investment decisions.
  • High-performance deal analysis helps you deliver quick, nimble service that is unmatched anywhere in the industry.

Precision LM™ provides a single integrated servicing platform for all commercial/multifamily loan products, including complex participations and investor structures. The platform streamlines key functions such as payment processing, money movement, bank reconciliations, investor reporting, construction loan servicing, insurance compliance and more. Leading commercial/multifamily lenders and servicers choose Precision LM for its automation, flexibility, ease of use and modern API-based integration options.

Find out more about Precision LM by viewing our offerings. If you’d like to learn more about our suite of lending solutions download the brochure.

Commercial Lending, Regulation

commercial lending , private debt funds , private lending