Hermes Investment Management is launching a direct lending strategy, backed by an initial commitment from an institutional investor, with a fund available later this year.
Hermes said the fund will offer stable returns from senior secured loans to small- to medium-sized enterprises (SMEs). It will have a UK focus initially, but with the flexibility to invest across the continent. The loans will be originated through a partnership with the Royal Bank of Scotland, which is a major lender to SMEs with a large book of existing loans. Hermes said it will also use its own contacts with private equity firms, banks and borrowing businesses to provide a pipeline of suitable transactions. Hermes’ head of private debt and CLPs, Patrick Marshall, commented: “UK senior loans have generated stable returns in the last eight years, despite the financial crisis, with those extended to mid-market companies offering about 55bps more yield than larger loans in recent years. The UK has the strongest creditor rights in Europe, which provides greater downside protection for investors.”