The €425bn global asset manager Schroders has taken a 25% stake in Dutch company Neos Business Finance, which issues loans to small and medium-sized enterprises (SMEs).
Neon, which has already provided loans on behalf of the industry-wide pension funds for the furnishing (Wonen) and retail sectors (Detailhandel) in the Netherlands, said it also expected to branch out into Belgium and the UK.
To date, Neos has issued 75 loans of up to €1m each – and totalling €48m – through its MKB Impulsfund.
Schroders said the new joint venture aimed to offer clients the option to invest in high-yielding loans to local medium-sized companies.
It claimed to be the first international asset manager to make SME loans directly available to institutional investors.
In the new venture, Schroders is to line up investors while Neos will select companies that want to finance their growth.
Neos said it wanted to fill the gap between bank financing and private equity, and that the level of interest charged was between covered short-term loans and mezzanine debt.
It added that the duration of the issued loans was up to seven years.
Quirijn Haak, director and co-founder of Rotterdam-based Neos, said: “We have a network of more than 50 local accountants and advisers who select the companies in the target group. Because the companies are their clients, our partners know them well.”
According to Haak, who has also been associate director at merchant bank NIBC, Neos is able to assess a company’s loan application within a few days.
Michel Vermeulen, director at Schroders’s Dutch division, said the asset manager chose Neos because of its track record.
Haak attributed Neos’s success to the fact that it uses the approach and analysis of SME loans usually applied for much larger companies’ structured finance solutions.
In his opinion, there are “tens of thousands of firms that would be eligible for this kind of direct loan”.
He estimated the Dutch market at approximately €1.5bn annually.
“The venture with Schroders should make it possible to service one-quarter of this market in the longer term,” he said.