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Alternative Market Briefing

Regulators look more closely at non-bank lending as hedge funds, investors see opportunity

Wednesday, April 03, 2013

Bailey McCann, Opalesque New York:

Non-bank lending, or shadow banking has been an area of concern for regulators since the crisis. However, allocators, hedge funds and businesses, are looking to the space more and more, as liquidity in more traditional banking spaces dries up. This reality is true worldwide, causing regulators to try and find ways to limit the scope of shadow banking. However, they may find little support for new rules even in the public.

Global demand

Shadow banking has long been a space without much regulation, or even much public awareness of its existence. Since the crisis, shadow banking has taken on a more public profile, and arguably a more significant role in the global financial system. "Capital requirements, regulation, and deal size have made banks not to lend without significant provisioning," said Alfredo González, Co-Fund Manager, LW Short Duration Fund, in an interview with Opalesque. He noted that because of new rules on traditional banks, those banks want bigger deals, with better, creditworthier entities often at the expense of smaller, but still sound ones. LW Asset Management, the firm that manages the LW Short Duration Fund, is focused on Latin America. Middle market Latin American businesses have seen many credit options dry up in the wake of the crisis, creating a significant demand for non-b......................

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