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IPE special report May 2018

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Gatemore warns of 'wall of capital' in distressed investing

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  • Gatemore warns of 'wall of capital' in distressed investing

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UK – A "wall of capital" committed to distressed investing is likely to outstrip investment opportunities in the area, Gatemore Capital Management has warned.

The adviser, which last week launched a delegated CIO service to stand alongside its fully outsourced CIO offering, said it was because of the amount of capital that it preferred to seek out opportunities to invest in regulatory capital.

Speaking with IPE, managing partner Liad Meidar said the exposure to the banking sector was a way for its clients to take advantage of the requirement for European banks to deleverage their balance sheets.

"We are in the early stages of a very long-term deleveraging process, and that is going to create opportunities in a number of different areas," he said.

"There's been a wall of money built up in distressed investing, and that wall is maybe a bit bigger than the opportunities, so we haven't gone down that route."

Meidar said that, instead, one of the investment approaches Gatemore would pursue for clients would be exposure to regulatory capital – allowing banks access to required capital without forcing the institutions to sever ties with their loan books.

Discussing the strategy's regional exposure, he said: "The reg-cap strategy does mostly target German, French and UK lenders, but I wouldn't say we're avoiding the peripheral European opportunities – we just haven't seen the right opportunity to go after."

He added that while Gatemore did invest in more commonplace asset classes such as equity and bonds, it did not see any opportunity to add value through fund selection in the area.

Asked how easy it was to convince UK pension funds that make up part of its £833m (€987m) in assets under advisory to consider regulatory capital, UK managing director Mark Hodgson credited professional trustees for allowing the investments to proceed.

"We work very closely with a number of independent trustees, and clearly they are becoming more and more important in the UK market," he said.

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