Investment strategies focused on extending credit through private debt, bi-lateral loans and direct lending have grown significantly in recent years. This trend is continuing as investors search for higher yields than the traditional fixed income products have produced, private equity investors spin up direct lending teams, allocators increase their allotment to private debt given the attractive risk-return profile and the global market volatility brought on by COVID-19 endures. This burgeoning interest in direct lending activity, coupled with complex fund and deal structures, has seen increasing demand for next generation solutions to alleviate the administrative burden associated with bespoke financing solutions at scale.

It's against this market backdrop that we've been collaborating with fund managers to address their workflow challenges through our Private Debt Solution. It aims to improve ROI by streamlining workflows and enhance performance by organizing and digitizing data. In turn, credit managers and direct lenders benefit from more modern reporting processes and workflows that support active and informed decisions around pipeline and portfolio management, compliance and risk.

As we near the end of 2020, we took the opportunity to talk to Jocelyn Lewis, the strategy lead for our Private Debt Solution, to discuss some of the key trends we've seen in the market this year and how our solution is helping fund managers navigate today's landscape.

Q: Technology is becoming more important to the industry. Why do you think this is?

Growth and competition within the private debt segment is a huge driver for technology. This year in particular, we've seen that fund managers are looking for cost-effective technology solutions that can help them to alleviate the administrative burden associated with increasing deal volume and structural complexity. Essentially, they want to spend more of their time focused on alpha generation and beta management. In order to do that, they need technology that their teams can leverage to effectively organize their data and processes, safely and securely share information and facilitate more expedient reporting and communication for informed investment decisions.

Q: There are many different teams involved in managing the lifecycle of a debt investment. Can a single solution really cater to them all?

Our integrated solution spans the entire credit lifecycle and connects all of the key participants in the deal from originators and credit analysts to portfolio managers, investment committees, asset management, operations teams and investor relations. It was really important to us that we developed a solution that supports and connects all of the relevant teams. So, for example, for originators, we provide real-time, centralized pipeline information, while for credit analysts, we deliver bespoke analytics and reporting capabilities. We spent a lot of time with our clients to ensure we understood the exact requirements of different teams before we started product development.

Q: What capabilities are included in the solution?

Our platform brings together pipeline management, underwriting, deal execution & funding, loan administration & reconciliation, agent services, portfolio management and valuation. Clients can access each capability as a point solution or select an integrated platform for end-to-end lifecycle management that grows with their firm.

Q: What makes your solution so popular among market participants?

Our flexible solutions allow our users to share information across teams without over-engineering data ingestion and connectivity to clients' existing systems. And, as we continuously release new product features, we differentiate by releasing these features for all users, without the need for expensive and time-consuming work orders. Additionally, the regular feedback loop from our clients and market participants informs our product roadmap for maintaining a best-in-class functionality to support our user base. We also provide simplistic pricing based on scoping the implementation requirements as well as predictable licensing costs to avoid hidden fees for our clients. Our solutions are supported by a dedicated client management team of super users who are available 24/7 to address any questions clients have.

Q: What is the single most important benefit of the solution?

Digitizing data in an organized fashion to create more efficient portfolio monitoring and to simplify reporting processes is a significant benefit to our clients. Data transparency from the borrower to the lender and from the lender to their limited partners is crucial in today's environment. Investors are asking more questions, more frequently, and about a broader range of topics including valuations, diversity, ESG and technology. These ongoing diligence queries lack standardization and include comprehensive questions in varying formats. Our solutions give our users the technology to ingest information from their borrowers into their own database and then query the database, as needed for ad-hoc, curated content that they can deliver confidently and quickly in support of an investor request. By simplifying investor reporting, teams have less disruption to their day-to-day routines and investors benefit through the speed and efficacy our solution brings.

Q: What enhancements can clients expect for next year?

The simplicity of automatically setting up investments for loan administration and portfolio monitoring has been well received by our clients this year. Next year, we plan to build on this by adding additional features to the solution. Additionally, based on user feedback, we are looking to enhance both our pipeline functionality and our covenant monitoring capability. Stay tuned to our blogs, vodcasts and other thought leadership - which is all available on our Private Debt webpage - for more information and feel free to contact us if there is a specific topic you would like us to address.

Posted 16 December 2020 by Jocelyn Lewis, Vice President, Head of Commercial Strategy for Private Debt Software Solutions, Americas, S&P Global Market Intelligence

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.