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Hermes launches direct lending strategy

Hermes Investment Management has launched the Hermes Direct Lending Strategy with an initial commitment from a cornerstone institutional investor.

Hermes intends to follow this with the launch of a fund later in the year, subject to regulatory approval.
 
The strategy aims to provide access to the stable, low-correlated returns offered by predominantly senior-secured loans to small and medium enterprises. It will initially have a UK focus, where there is the largest and most creditor-friendly lending market in Europe, while maintaining flexibility to invest across the continent.
 
UK senior-secured transactions will be originated through partnership with Royal Bank of Scotland (RBS), a major lender in the sector with a substantial book of existing loans.
 
The team’s own network of contacts among private equity firms, banks and borrowing businesses will also provide a source of origination across the continent.
 
Patrick Marshall, head of private debt and CLOs, Hermes Investment Management, says: “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. Through the Hermes Direct Lending Strategy we aim to consistently outperform for our investors by lending to attractive, growing businesses on terms seeking capital preservation and yield capture.”

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