LONDON Fund manager Hermes Investment Management said on Friday it had launched a direct lending strategy to invest in the debt of small and medium-sized businesses, in partnership with Royal Bank of Scotland (RBS.L).
The firm, which manages 26 billion pounds, said the Hermes Direct Lending Strategy already had an initial commitment from an institutional investor, and it aimed to launch a fund later in the year.
Hermes said the strategy would provide access to stable, low-correlated returns offered by predominantly senior secured company loans, primarily in Britain but also in mainland Europe.
The UK senior secured transactions will be originated through partnership with RBS, it said, while private equity and other contacts would help source deals from across the region.
"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 55 basis points more yield than larger loans in recent years," Patrick Marshall, head of private debt and collateralised loan obligations at Hermes, said.
(Reporting by Simon Jessop; editing by Carolyn Cohn)