“May you live in interesting times” – so says the apocryphal ‘Chinese curse’

According to philologist Garson O'Toole, the well known phrase is more likely to have originated from Joseph Chamberlain, who’s 1989 speech proclaimed: “I think that you will all agree that we are living in most interesting times. I never remember myself a time in which our history was so full, in which day by day brought us new objects of interest, and, let me say also, new objects for anxiety.”

For anyone with any interaction with the fund finance space over the past six months, Chamberlain’s words will ring true. It seems as though on an almost daily basis, new events and “objects of interest” are hitting headlines and inboxes alike.

The rapid collapse of SVB Financial Group in the US sent shockwaves across the industry. However, over in Europe, thanks to the separation of SVB’s US and UK's subsidiary bank, despite one stressful weekend, it was business as usual by Monday for SVB UK following HSBC’s swift acquisition of the UK entity. That quick resolution has meant not only continued service for existing clients, but also continued lending to new funds.

However, it’s not all rosy. During the past year, the fund finance market has been experiencing capacity and cost constraints. With several key lenders, including larger banks, retrenching from the market, securing fund finance is a much harder and more expensive task today.

The latest edition of the Fund Finance Tracker evidences the more challenging conditions. The major changes to come through include increased minimum ticket sizes and reduced LTVs. This tells us that lenders are moving into more defensive positions; lending to a smaller group of funds and managers (typically larger, well known names), and tightening their risk controls.

Perhaps surprisingly, this edition has once again welcomed new lenders to its ranks. Of course, the tracker doesn’t (yet) include every active lender in the space, but the increased willingness of lenders to showcase themselves in this report speaks to their desire and willingness to support fund managers.

This emerging shift from private to public also backs up recent conversations with market participants that the fund finance space has become more collaborative in recent months. It is encouraging to hear that in response to the increasing challenges and threats, lenders are working more harmoniously with each other to find solutions.

This should be of great comfort to managers. While sourcing liquidity is the name of the game right now, it is wholly encouraging to find lenders rolling up their sleeves in a united manner to keep markets moving.

Let’s hope that over the coming months, the daily changes throw up more objects of interest than those of anxiety.