Key takeaways

• Direct lending by funds has been experiencing significant growth in the European Union, spurred by a search for better yield by fixed income investors facing the prospect of negative yields on sovereign debt and low yields on corporate debt.
• Many EU jurisdictions, such as Germany, France and Italy have recently liberalized their regimes for direct lending by funds, in order to facilitate the provision of finance by funds to borrowers in their jurisdictions. The United Kingdom already has a liberal regime for the conduct of lending activities by non-bank entities (provided the loans are not consumer loans or mortgages).
• In addition, there is now work underway to develop a pan-European regime for loan origination by funds, including the possibility of loan originating funds enjoying a passport enabling them to provide loans to borrowers throughout the European Union. This client update discusses these developments, including the key aspects of the new national regimes for loan origination by funds.