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Rewriting rules around any class of financial assets often turns into a game of consequences, many of them unintended.
The UK’s Labour government has set itself ambitious targets for growing the economy and sees stimulating greater investment into UK plc as a key element in delivering that plan. This has put banks and lenders in the spotlight, and the Chancellor of the Exchequer, Rachel Reeves, has offered them plenty of encouragement with a series of measures to relax the rules surrounding bank lending that were tightened up in the wake of the 2008 Global Financial Crisis.
One consequence of that stricter regime was to spawn a complex array of private debt mechanisms as banks were forced to become more risk averse. These not only ensured there were routes for businesses to raise investment capital but also offered assets with attractive yields for institutional investors, especially during the decade after the GFC, when traditional fixed income assets offered meagre returns. It was a very convenient marriage of interests. It did not suit everyone, however.
These changes saw many insurers move to private debt. So, will there be a shift back?
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