Legal & General is to provide direct lending to mid-market companies in the UK and Europe, buying a 40% stake in alternatives manager Pemberton Asset Management.
In addition to becoming a strategic investor in Pemberton, Legal & General said it had made an initial commitment to invest €250m in direct lending through Pemberton’s lending platform to UK and European corporates.
It said it intended to make further significant commitments to the platform in future.
The direct lending platform is aimed at institutional investors and focuses on lending to companies with turnover of between €100m and €1bn.
Paul Stanworth, managing director at Legal & General Capital, said: “The UK and Europe have been too dependent on bank financing, and this impacts particularly on businesses wishing to invest and expand.”
He said creating a new channel to deploy longer-dated institutional money in the mid-market sector would help drive economic recovery at a time when bank balance sheets were constrained.
He said it would also create a further asset class for direct investments by insurance companies and other institutions.
Legal & General Group’s chief executive Nigel Wilson said creating an institutional private placement market for growing mid caps – as already existed in the US but not in the UK – would increase the variety of corporate funding and give investors good risk-adjusted returns.