After UK Chancellor George Osborne recently proposed a credit easing scheme that would make more credit available to UK businesses, several pension fund executives have stated that they are open to the idea.
However, executives have made it clear that education and a transparent course of action will be required before pension funds will begin making more credit available to small/midsize business owners. The proposal came at a conservative party annual conference on October 3, and announced a plan in which the public financial sector would help increase the amount of credit available to UK businesses, in particular small to midsized firms that are having trouble obtaining financing.
One of the methods mentioned in the credit easing proposal involves the use of corporate bond portfolios, which would be purchased from banks by small to midsize enterprises (SMEs). Such securitised loans could be offered within asset pools such as pension funds, and to ensure quality guidelines the government would be responsible for underwriting the loans. The chief investment officer of pension fund P-Solve has stated that a number of the firm’s clients already have portfolios that would be ideal for investing in securitised loans for SMEs.
Several chief executives and investment officers, including Glyn Jones and Penny Green expressed satisfaction with the government proposal, stating that it could offer an ideal opportunity for the growth of pension funds if the proper controls are put in place. When asked about the credit easing proposal, Chancellor Osborne stated that it could be “similar to the national loan guarantee scheme, helping to prevent an additional credit burden amidst an already troublesome debt crisis.
Nonetheless, the proposal is not without scepticism, as chief executive of Forum of Private Business, Phil Orford, recently stated that it may be more beneficial for banks to package overdrafts and small business loans together into securitisations that could be purchased by the government.
