New study reveals investors are eyeing private debt amid economic challenges

By Newsdesk

November 23 2023
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As the private credit market becomes increasingly pertinent in the investment landscape, Aeon Investments, the London-based credit-focused investment firm, has come forward to allay fears over the need for additional regulation in this sector.

New study reveals investors are eyeing private debt amid economic challenges

With the market currently valued at a whopping $1.6 trillion, there have been voices of concern pointing to a lack of transparency and potential risks for investors. However, Aeon Investments firmly believes that the market is sufficiently regulated and that further intervention could be counterproductive.

Khalid Khan, the Head of Portfolio Management at Aeon Investments, stands strong against the call for unnecessary regulation. He asserts, “Additional regulatory intervention, in the absence of clear evidence of market failure or emerging risks, is neither necessary nor prudent at a time when such interventions could disrupt the flow of much-needed capital during a period of economic fragility." Khan emphasizes that the existing regulatory frameworks, such as Europe's Alternative Investment Fund Manager Directive (AIFMD), are adequate for monitoring leverage and other risk factors.

A recent survey conducted by Aeon Investments covered 101 senior investment managers across Europe and the Middle East, who collectively manage $545 billion in assets. Findings suggest that nearly three-quarters of these managers plan to increase their allocations to private debt and structured credit in the next year, with 77% viewing private debt as increasingly attractive due to its defensive qualities, especially during market distress.

Despite the push from some quarters for more regulation, Aeon Investments holds that these demands often lack specificity on what such regulation should encompass. According to Khan, transparency and discipline in underwriting are always welcome. He cautions, however, "But if the call is simply for a more restrictive regulatory regime, then it will needlessly stifle the market."

Aeon Investments prides itself on exercising stringent prudence in its lending operations, from thorough underwriting practices to careful loan structuring and monitoring. The company commits to matching fund liquidity with the nature of its lending activities and ensures rigorous borrower due diligence.

Further fortifying their investment approach is their dedication to integrating Environmental, Social, and Governance (ESG) factors into their decision-making process. This heightened commitment not only helps in identifying additional risks but also promotes an extra layer of risk management, contributing to an enhanced scrutiny level on all investments.

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