In advance of the event, Delano spoke with David Capocci, partner and head of alternative investments at KPMG. He moderates the “Private debt – opportunities and challenges” panel, Tuesday 26 November at 2:10pm.
Aaron Grunwald: What do you want the audience to get most from the “Private debt – opportunities and challenges” panel?
David Capocci: We’d like our audience to come away feeling like they have gained essential insights into the private debt market. We’ll start with an overview of the current state of the market, based on KPMG and Alfi’s recent market study of debt funds. Our market intelligence covers topics like fund structure, product penetration, breakdown of current debt strategies and management fees.
We’ll [also] dive into strategic considerations when setting up and operating a fund, with views from eminent alternative players. Industry experts will share the opportunities and challenges of private debt products, as well as real-world examples showcasing the rise of debt fund products, lessons learned in recent years, and the way forward in the future.
What is the outlook for Luxembourg-based loan funds, 2020-2025 or so?
Assets under management in the loan fund market increased by 23.5% in 2018. Our prediction is that we’ll see this same growth reproduced each year through to 2025, meaning a steady evolution in the market. European regulations will also have a significant impact on the development of the loan fund industry in the next five years, especially in key areas like international taxation, sustainable finance and stress testing guidelines. As these regulations evolve in the coming years, we expect the loan fund landscape to evolve along with them.
What might surprise investors most about debt/loan funds?
Two factors may take investors by surprise. First and foremost, even though a new, less regulated and more flexible type of investment fund, the Reserved Alternative Investment Fund, was launched in 2016, the specialized investment fund (SIF) still dominates the regulated market. A second surprise is the size of the unregulated market. Although relevant data is tricky to gather, we estimate that, as of 2017, the unregulated market is just as large as the regulated market. In comparison with regulated vehicles, unregulated vehicles are perceived as extremely flexible--they cost less to set up and operate as CSSF approval, reporting and supervision are not required.
Aside from your own talk at the ALFI event, which speech or panel are you most looking forward to hearing, and why?
I’m looking forward to the “PE for the greater good” session by Sachin Vankalas, director of operations and sustainability at Luxflag [editor’s note: Tuesday 26 November at 4:15pm].
Sustainable finance has mushroomed from a niche investment product to a huge opportunity for PE firms. ESG is increasingly embedded in every step of the investor decision-making process. Embracing ESG factors can generate value--not just for investors, stakeholders and portfolio companies, but for society as a whole. I look forward to hearing Sachin tackle this important topic in greater depth in which will no doubt be an insightful session.