The following is an excerpt from Robert Milburn | October 6, 2015 | Barrons.com |
Dodd-Frank and Basel III financial regulations have inadvertently created a massive investment opportunity. With U.S. banks facing ever stringent capital requirements, financing for small and medium size businesses across the country has dried up. Enter shadow banking. Direct-lending fund managers are stepping into the breach and offering floating rate loans to small and medium-sized U.S. businesses. A portfolio of such direct-lending vehicles can produce juicy returns, net of fees, of between 6% and 14%, according to Tampa, Florida-based financial advisory Bayshore Capital Advisors. That’s hard to beat in a low-yield environment.
“This is easy for most clients to understand because they see this [search for alternative financing] in their own business,” says Jonathan Bergman, managing director of New York-based TAG Associates, a multi-family office with $8 billion in assets under management. Bergman says a client with $10 million in assets, TAG’s minimum, who has a balanced risk tolerance, could consider allocating 5% of their portfolio to this direct lending strategy.
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