Maintaining liquidity in volatile markets with structured loans.
High net worth investors can tap into exciting investment opportunities in turbulent times with the help of loan financing. Philippe Leuenberger, Head of Strategic Advisory & Structured Financing Solutions at Credit Suisse, talks in this interview about the opportunities in the current market environment and attractive financing solutions.
Mr Leuenberger, 2022 has been a turbulent year for the financial markets so far. What issues have been of particular concern for your clients?
Philippe Leuenberger: The greater volatility in the markets is prompting investors to restructure their lombard loans and, in some cases, to decrease their leverage. They are also increasingly considering private equity funds and hedge funds. Other concerns include how they can protect themselves against rising interest rates and inflation and which real assets, sectors, and individual stocks can generate growth in a stagflationary environment.
What changes are you seeing in the strategic focus of single family offices and high net worth private investors?
We are seeing a trend toward increasing allocations in alternative investments, such as private equity, private debt, private real estate, commodities, and hedge funds. In a low-yield environment, such investments open up additional sources of returns for investors willing to accept a higher degree of illiquidity. In the case of single family offices, we are seeing that investment decisions take into account not only financial returns but also, increasingly, environmental and social considerations.
What's the reason for this new focus?
It can be explained by the historically high returns and diversification opportunities within alternative investments. In particular, private equity provides investors with attractive risk-adjusted returns compared with the stock exchange. Private market investments allow investors to benefit from the significant growth in the value of a company prior to a strategic sale. Because a large proportion of value creation takes place in the early stages of a company's development.
Where do you see opportunities at the moment for your high net worth clients?
Our clients gain access to attractive investment opportunities via the Strategic Advisory team. For example, a number of start-ups have decided to postpone going public due to the uncertainty in the financial markets. Instead, such companies have been seeking private investors to meet their capital requirements. In the area of private real estate, our clients have the opportunity to invest in exclusive properties, such as hotels and new construction projects.
Why do structured loans play a major role in this particular environment?
Structured loans allow us to take account of all types of assets when granting credit and thus provide customized, flexible solutions. Given the strong focus on alternative asset classes, clients are increasingly expressing a desire for loans that are secured by hedge funds or private equity funds. Structured loans secured by unlisted shares in a limited company are a key way for entrepreneurs to seize opportunities in the current market environment. By contrast, lombard loans do not offer this flexibility at the moment, as the current sharp fluctuations in securities are affecting them.
Structured loans may be used to finance the buyout of minority shareholders ahead of an IPO and to protect assets in combination with the corresponding hedging strategies, for example. To meet all these needs, our Structured Financing Solutions team has further developed its structured loans.
Structured loans allow us to take account of all types of assets when granting credit and thus provide customized, flexible solutions.
Philippe Leuenberger, Head of Strategic Advisory & Structured Financing Solutions at Credit Suisse
How does your team manage to cover clients' very different needs?
We are a high-performance unit within Premium Clients specializing in complex financing, corporate and capital market situations. Our credit specialists have decades of experience in structuring complex financing solutions. This expertise, together with our comprehensive skills in alternative investments and our close collaboration with the Investment Bank, enables us to produce customized, flexible solutions for our clients.
In the area of M&A and succession solutions, our offering includes access to our broad, international network of experts and entrepreneurs. We supply our clients with comprehensive advice throughout the entire process – from the preparation phase to the conclusion of a transaction.
Our clients are supported on an individual basis by our dedicated cross-divisional team and receive direct access to Senior Management at Credit Suisse and to our specialists. This means that they benefit from the best possible advice on complex issues and from a shorter processing time.