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THE Alternative Credit Awards 2025 are open for entries and all stakeholders are urged to make their submissions before the 16 May deadline. The awards, hosted by Alternative Credit Investor, recognise the most influential fund managers, specialist lenders and service providers shaping the alternative credit space.
This year sees the introduction of additional categories, highlighting growing areas such as asset-based finance, collateralised loan obligations and
fund finance.
“We’ve already received an array of high-quality submissions since we opened for entries last month,” said Alternative Credit Investor’s founder and editor-in-chief
“I’m delighted to see how much engagement we’ve had from the industry for these accolades and I’m looking forward to announcing the
KEN Kencel and Anthony Fobel met in 2019 at an industry conference. What was meant to be a half an hour catch-up turned into two hours spent chatting. Something had just clicked. And a deal was signed in 2022.
“When we began
actively looking for a European partner, we quickly concluded that building that business from scratch was going to be very challenging, given the significant barriers to entry,” Kencel recalled.
“So, we decided with Nuveen we needed
to find a partner that looked a lot like us. After significant research and conversations, several people in the industry mentioned we should speak with Arcmont, given our similar investment approach and culture.”
shortlist in due course.
“I’d strongly encourage any fund manager, specialist lender or service provider making their mark on the alternative credit sector to submit their entries before 16 May to be in with a chance of making the shortlist.”
The winners will be announced on Wednesday 19 November 2025 at the Royal Lancaster London after a champagne drinks reception and gala dinner.
For more information, please access our dedicated awards website at alternativecreditawards.com.
It has been two years since Nuveen completed the $1bn (£0.77bn) acquisition of Arcmont Asset Management, founded by Fobel, and through its combination with Churchill Asset Management, led by Kencel, it is already getting its money’s worth.
In 2024, Nuveen Private Capital, the entity under which Churchill and Arcmont work
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Alternative Credit Investor has been prepared solely for informational purposes, and is not a solicitation of an offer to buy or sell any private debt product, or any other security, product, service or investment. This publication does not purport to contain all relevant information which you may need to take into account before making a decision on any finance or investment matter. The opinions expressed in this publication do not constitute investment advice and independent advice should be sought where appropriate. Neither the information in this publication, nor any opinion contained in this publication constitutes a solicitation or offer to provide any investment advice or service.
The alternative credit industry is not short of publicity and scrutiny, but it has, in my opinion, not had enough opportunities to celebrate its achievements en masse.
The Alternative Credit Awards are the definitive industry accolades and last year’s awards ceremony attracted the leading players from the sector for a fantastic night of networking and revelries.
Of course, the awards are not just about the evening when we announce the winners, but about recognising the important work that companies are doing to make the industry into what it is today.
We have added more categories this year, to recognise the diverse types of funding and investment vehicles that come under the alternative credit umbrella.
Please submit your entries before the deadline of 16 May 2025 to be in with a chance of making the shortlist.
Best of luck!
SUZIE NEUWIRTH EDITOR-IN-CHIEF
cont. from page 1
together, has had a record year. Churchill closed or committed over $13bn across approximately 400 transactions while Arcmont committed to almost €6bn (£5bn) worth of deals. Nuveen Private Capital now manages nearly $80bn in assets.
Both chief executives are keen to continue doing what they have been, which is focusing on the “core mid-market” but are at the same time planning how they can leverage each other’s capabilities to further expand their businesses and create a truly global player.
First up is a NAV lending strategy the firms will be launching.
“The NAV financing business is going to be the first business that we formally launch which is both an Arcmont and Churchill business,” said Fobel. “We see that as very much a global product. And of course, what we're able to leverage is not just Arcmont's private equity relationships in Europe but obviously Churchill's outstanding relationships as an investor in over 300 private equity funds in the US. So that's an incredibly powerful combination as an origination tool.”
Kencel added that while Churchill has a large cashflow lending business, it has not yet expanded into asset-based lending,
which he highlighted as an interesting area.
Churchill also currently focuses on primarily funding new deals, but Arcmont has capital solutions capabilities in Europe, which could be brought to the US, he noted.
Kencel believes what Arcmont can take from Churchill on the other hand is the group’s private equity capability, which sees it invest in hundreds of funds and co-invest alongside general partners, which also helps with sourcing direct lending opportunities.
“The way that we've brought Churchill and Arcmont together is meant to leverage our businesses and synergies, while not impacting what we each do best –disciplined investing and portfolio management in our respective geographic
markets,” Kencel said.
Although Fobel and Kencel are co-chief executives of Nuveen Private Capital, they very much focus on Arcmont and Churchill, respectively, day-today. But they’ve found several synergies through the combination.
“One of the big synergies we have with Churchill is our ability to cross-sell our investors,” Fobel explained. “The second great synergy is our ability to cross-refer deals to each other. The third important synergy is our ability to take some of our European strategies to the US and vice versa. For example, we've got a very strong and successful capital solutions business, which we are looking to expand into the US. Similarly, Churchill has a very strong secondaries
business, which we are potentially going to bring to Europe. You can see holistically, the combination of Arcmont and Churchill under Nuveen Private Capital is extremely powerful and offers a unique combination of strategies to investors.”
While Kencel and Fobel think about ways the two firms can partner, is there any appetite to team up with a bank, something much of the industry seems to be doing?
Kencel says not right now.
“Our view is that successful partnerships really need to be grounded in a win-win, meaning it has to work for both sides,” he said. “We found that certain banks didn't want to actually deploy capital long-term, but were looking to get the benefit of a private credit manager’s relationships and distribution model. They were looking at private credit managers as a place to bring the capital – a place to hold the loans they didn't necessarily want to hold.
“Our conversations with banks all came down to the same thing. If it benefits our investors and we can find a partnership relationship that makes sense, then we would be open to it. So far, that has not happened.”
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LARGER deals are expected to be seen in the healthcare sector across the UK and EU, creating more opportunities for specialised direct lenders in 2025.
According to Graham Phillips, private equity partner at Clifford Chance, levels of private equity investment in the healthcare sector continue to be strong, despite wider macroeconomic headwinds. In fact, despite increasing regulatory scrutiny, a recent report from the Private Equity Stakeholder Project has found that private equity activity in the sector remained high through 2024, identifying 1,049 private equitybacked deals in the US.
Although higher interest rates have created a gap between seller and buyer expectations, halting some sales processes, this is expected to change.
“As inflationary pressure subsides and borrowing costs fall, this valuation gap should narrow and be the catalyst for increased deal volumes, with many sponsors ready to deploy their significant amount of dry powder on
healthcare investments that can deliver the level of returns they require,” Phillips said.
In Phillips’ view, businesses that can be scaled-up quickly, whether organically or through bolt-on acquisitions, are likely to be particularly attractive.
“The sources of these future acquisition opportunities is also likely to be varied, including the sale of non-core assets by large pharma companies, sponsor-to-sponsor trades if projected growth for the target business in the next chapter of its evolution is in-line with an incoming sponsor’s return requirements, as well as takeovers of
public listed companies if the private equity investor can meet the valuation of the target set by its board and shareholders,” he added.
According to investment consultancy bfinance, private debt investors are seeing higher returns in healthcare lending, with fund IRR targets suggesting a premium of more than 300bps compared with traditional direct lending strategies. The research showed that the median net IRR target for healthcare direct lending strategies is nearly 15 per cent, versus 11 per cent for generalist US direct lending strategies.
“Companies in this
universe are often poorly served by the banking sector,” bfinance noted. “They are also overlooked by mainstream direct lenders due to distinctive characteristics… And, while some firms can generate cash via pharmaceutical and biotech royalties, this is not an option for all. Even for those who can pursue this route, the investment appeal of royalties has been somewhat dampened when compared with credit in a climate of higher interest rates. Specialist lenders – featuring expertise from the related spheres of healthcare venture and healthcare banking – can inject themselves into a financing gap.”
THE NEW TAX YEAR begins on 5 April 2025, when investors will get another opportunity to make the most of their ISA allowance by transferring existing funds or opening up a new account.
This year, the Innovative Finance ISA (IFISA) is expected to be more popular than ever, thanks to its strong track record of delivering competitive returns, and the recent expansion of the IFISA to include open-ended property funds and long-term asset funds, in addition to crowdfunding and peer-to-peer loans.
Kuflink has been an approved ISA manager since 2017, making it one of the most seasoned IFISA providers on the market. Since its inception, Kuflink has offered returns of up to 10.26 per cent per year. This exceeds the industry average of 7.61 per cent per annum, according to the latest Peer-to-Peer and Direct Lending (PADL) Index statistics.
This success is down to several factors. Kuflink has built strong connections within the property sector, allowing it access to lending opportunities that other platforms may not have. The company ensures that all loans are structured with risk-adjusted pricing, meaning that borrowers can obtain flexible and fair funding while investors receive attractive interest rates. Kuflink also operates efficiently, ensuring that more of the returns flow back to investors.
“Kuflink’s ability to deliver consistent returns is the result of a disciplined and structured lending approach that prioritises security, risk management, and transparency,”
says Hiran Patel
chief risk officer at Kuflink.
“Unlike some platforms that focus purely on yield, Kuflink ensures that all loans are secured against UK property, giving investors the reassurance of an asset-backed investment.”
Patel believes that it is the platform’s strict due diligence process which has driven its IFISA success, and enabled Kuflink to build up a strong community of repeat investors.
Before approving a loan, Kuflink carries out comprehensive credit checks, property valuation assessments, and an in-depth assessment of the repayment strategy to ensure that borrowers have the means to repay. As a result of this careful approach, Kuflink repaid more than £73m to its investors last year.
Kuflink also maintains conservative loan-to-value ratios, typically below 75 per cent, which provides a strong safety buffer in the event of a default. In cases where
repayments are missed, Kuflink acts swiftly to recover funds, using its expertise in property asset management to secure investor capital. This proactive approach to risk management has allowed Kuflink to protect investor funds while continuing to deliver attractive, tax-free returns.
“One of Kuflink’s most remarkable achievements is its nine-year track record with no investor capital losses,” says Patel.
“This success is largely due to careful risk management, conservative lending practices, and a proactive approach to loan recovery.
“Each loan undergoes rigorous credit and risk assessment, ensuring that only financially stable borrowers are approved.”
Kuflink’s investors have reported that they appreciate the ease of use of the platform, as well as the predictability and stability of the platform’s IFISA, which provides a consistent source of tax-free income.
Investors also have the flexibility to spread their capital across multiple loans using the auto invest account, reducing exposure to any single borrower. These safeguards have played a crucial role in Kuflink’s ability to maintain a zero-capital loss record for investors to date.
“The long-term success of any IFISA provider depends on sustainable risk management, a clear regulatory framework, and a history of delivering consistent returns,” adds Patel.
“Kuflink remains confident that its secured property lending strategy, and rigorous loan assessment process will continue to differentiate it in an increasingly crowded market.”
THE GROWTH of the private credit sector has created a structural shift in the UK’s real estate market, as traditional lenders have scaled back.
According to Dan Marriott, real estate partner at Macfarlanes, this is due to the evolution of the real estate lending market over the past few years, which has seen alternative lenders increase their share. The lower rate environment means that this shift is likely to be permanent.
“The sources of investment are changing,” said Marriott. “Higher interest rates have led to reduced transactions and stricter lending standards.
“Similarly to the global financial crisis, more traditional lenders such as banks and insurers have scaled back.
“This void has been filled by alternative lenders. While major central banks are now on a rate-cutting path, the expansion of private credit is likely to be a permanent structural change. And it’s thanks to a regulatorydriven retrenchment of bank lending.”
Marriott has noted that there have been some significant changes in the UK real estate market
over the past few years, including the rise of alternative lenders. He added that operational real estate is currently responding to a series of mega-trends including demography, digitisation, deglobalisation and decarbonisation. These trends will help shape the market going forward.
His colleague Laura Bretherton, finance partner at Macfarlanes, added that even within this crowded marketplace, and against the backdrop of lower transactional activity in the real estate market, there are still a number of opportunities for private credit.
“In 2025 and into 2026, a vast number of the financings put in place between 2020 and 2022 (when transactional
activity was at a peak) will mature,” Bretherton said.
“We anticipate that ‘refinancing wall’ to offer opportunities for private credit to refinance existing bank debt.
“With banks being increasingly conservative in terms of the leverage they can offer, coupled with the regulatory constraints that they face in originating and holding commercial real estate loans, there is a potentially very large opportunity for private credit to step into the breach.”
However, Bretherton added that as more private capital pours into the real estate debt markets, the risk profile of these investments could change.
“There is potentially a risk that as the number
of credit fund lenders look to seize some of the opportunities in the current real estate market, some funds start to take on increased risk by, for instance, offering higher leverage, agreeing looser terms and lower pricing in order to win mandates,” she added.
“However, there appears to be sufficient prudence among sophisticated credit managers to minimise these risks, and lenders will look to differentiate themselves among an increasingly wide pool of potential lenders based on their relationships with sponsors and borrowers, the certainty and speed of execution that they can offer, and their ability to offer flexible financing solutions to meet their potential borrowers’ business plans.”
Bretherton said that refinancing is expected to be a consistent theme across the year ahead, especially as transactional activity picks up.
“Lenders will need to focus on the ways in which they can differentiate themselves from other credit fund lenders, in order to win these mandates,” she added.
ISA SEASON IS HERE, and that means that the national papers are publishing their annual think pieces on the Innovative Finance ISA (IFISA). Every year, these articles ask the same questions – what is an IFISA and is it worth investing in? And every year the answer is inconclusive.
The IFISA is actually very easy to understand. It is a tax-free wrapper that retail investors can use to protect the first £20,000 of their peer-to-peer lending investments from taxation.
According to the latest 4thWay P2P and Direct Lending (PADL) Index, investors in the PADL sector have earned 7.31 per cent per annum annualised, net of investing costs and bad debts over the past 10 years. Folk2Folk’s returns are slightly higher than average, with current target returns starting from 8.75 per cent. These returns are typically higher than cash ISA returns and less volatile than stocks and shares ISAs, making the IFISA a great tool for portfolio diversification. Yet a lack of awareness around the risks and rewards of the asset class and the IFISA could prevent some investors from making full use of their IFISA allowance this ISA season.
“The biggest misconceptions about IFISAs stem from a lack of mainstream awareness and a misunderstanding of risk,” says Roy Warren (pictured), managing director of Folk2Folk.
“Many investors assume IFISAs are unregulated or excessively risky simply because they don’t operate in the same way as cash ISAs or stocks and shares ISAs.
“It’s important to remember that IFISAs are an investment, not a savings product. They carry a higher risk profile than cash ISAs but offer an alternative to stocks and shares ISAs for investors seeking a property-backed investment with a fixed monthly income.
“Unlike stocks and shares ISAs, where returns fluctuate with the market, IFISA investments generate returns based on agreed fixed interest rates, providing greater predictability. Rather than being in competition with cash ISAs or stocks and shares ISAs, IFISAs can complement them.”
Warren adds that investors also need to be fully aware of the risks before committing to an IFISA. While Folk2Folk has offered its IFISA since 2017 with zero capital loss to investors to date, past performance is no guarantee of future success. The key risks in P2P lending are the risk of borrower default and the lack of financial services compensation scheme (FSCS) protection in the event that the platform fails.
“Like all investments, IFISAs carry risk,” says Warren. “However,
they are not speculative; they are structured investment products where investors lend money through a regulated lending platform to UK businesses.
“At Folk2Folk we work to mitigate these risks by applying over 300 years of combined lending experience to assess every loan.
“Every application is manually reviewed by our experienced team with human – not automated –credit decisions. Additionally, unlike unsecured investments, our loans are secured against UK property, meaning there is a tangible asset behind every investment. We typically only lend a conservative loan-to-value ratio of around 60 per cent, based on independent valuations. And in the event a borrower defaults, their interest payments increase to compensate investors.”
While P2P investors do not qualify for FSCS protection, Folk2Folk has a detailed wind-down plan in place which ensures that if Folk2Folk were to cease operations, an independent provider would continue managing the loans and interest payments. This has been set up to ensure that – in theory –investors should get all their capital and interest back assuming the investment runs to plan.
“While they aren’t suitable for every investor, for those seeking tax-free, fixed monthly income, IFISAs can be an excellent option,” adds Warren.
“Raising awareness around how they work, who they’re for, and how they compare to other ISA options will help investors make informed decisions, rather than dismissing IFISAs due to misconceptions.”
As the private credit sector grows, the opportunities for fund financing are booming. Kathryn Gaw reports.
THE FUND FINANCE market has undergone a transformation over the past three years. Increased demand for flexible financing solutions, a shift towards more structured products and the rapid expansion of the private credit market have created new opportunities to deploy fund financing solutions.
“The buy-out space and alternative assets more generally are raising more and more money year-on-year and funds are getting bigger,” says David Wilson, partner at net asset value (NAV) financing specialists 17Capital. “As industry assets under management (AUM) grow, there is more demand for fund finance to help support that growth and to be a driver of value creation.”
The global fund finance market is believed to be worth more than
$1.2tn (£0.92tn), according to an Ares white paper published in October 2024. Ares believes that $850bn of this total is invested in subscription lines – dubbed sublines – while $175bn is in secondaries NAV, $50bn is in single fund NAV, $55bn is in GP solutions, $30bn is in hybrid facilities, and $25bn is in collateralised fund obligations (CFOs). Ares has predicted that the overall fund finance market will be worth more than $2.5tn by 2030.
However, other estimates are a bit more conservative, with most industry experts valuing the fund finance market at between $800bn and $1tn, with NAV financing solutions representing a much smaller share. A year ago, Oaktree Capital Management and 17Capital research found that NAV finance deal flow rose to around $44bn in 2023. They believe that the
NAV finance market could reach $145bn by 2030 and will play a “major role” in the evolution of financial markets in the process.
Whatever the current value of fund finance, one thing everyone can agree on is that the market is set for significant growth in the years ahead.
“The fund finance market, traditionally dominated by a relatively small group of lenders, has seen significant expansion of credit supply in recent times amid funds' increasing financing needs,” says Alexandra Aspioti, vice president, senior analyst at Moody’s Ratings.
“The rise in demand for financing over the past few years has created opportunities for non-traditional lenders, such as insurance companies and alternative asset managers, to fill the gap. We have observed a
significant increase in liquidity provided by non-bank lenders.
“We expect this trend to continue, with non-bank lenders – especially private credit funds – driving innovation and offering flexibility to accommodate the needs of funds and sponsors.”
Fund finance has been around in some shape or form for as long as funds have existed. It involves providing loans or credit facilities to investment funds, using the fund's assets as collateral. It can help funds access enhanced liquidity, while supporting their growth. It is also considered to be on the lower end of the risk spectrum, thanks to the underlying security and cautious lending approach taken. Most fund finance deals cap their loan-tovalue at 10 per cent, while returns frequently reach double digits.
Traditionally, banks have
dominated the fund finance space, thanks their access to large capital reserves, regulatory expertise, and risk management capabilities. However, over the last few years this has changed.
In 2022, Citibank exited the subline market, primarily due
to regulatory pressures. A key factor was the heightened scrutiny and risk associated with lending to private equity funds, as the market became more competitive and sensitive to credit risks. The following year, Credit Suisse left the fund finance market altogether following its acquisition by UBS.
The departure of these two titans left a significant gap in the market, and private credit funds have been quick to take advantage of this opportunity.
“Subscription credit facilities are a core financing tool for private funds, with adoption of this type of bridge financing having reached record levels,” says Aspioti.
“Sublines – traditionally dominated by banks – are becoming more popular among insurers. In addition to offering attractive returns on a risk-adjusted basis, these facilities provide valuable diversification for insurers' balance sheets, because the collateral is not directly tied to typical market risks.”
Sublines are considered to be very good quality loans, which are priced very cheaply. However, the large size of these loans means that only the largest financial institutions can afford to offer them. In the
private credit space, that means that only a couple of managers have the scale to offer sublines.
The NAV financing market is a different story. NAV financing grew in the wake of the global financial crisis, when traditional funding sources became less accessible, and funds sought ways to access liquidity without needing to sell assets or call on investors for capital immediately. Today, it is one of the fastest-growing segments of the private credit market, with new solutions being unveiled on a near-weekly basis.
Last year, Pemberton Asset Management raised more than $1bn for its NAV Strategic Financing Strategy, which provides finance to private equity firms, against the value of their investment portfolios. In September, HSBC Asset Management launched the first vintage of its own NAV financing strategy, with a significant anchor commitment from HSBC Group.
Validus Risk Management established its fund finance business in response to the growth of the market.
“The NAV lender market continues to grow, although there are few entrants which are completely new to this space,” says Gianluca Lorenzon, head of fund finance advisory at Validus
against the value of a portfolio's assets. While Lombard loans are typically secured by financial assets like stocks, NAV financing is based on the net asset value of a broader investment portfolio.
“Successful implementation requires finding the appropriate balance between the desired
“ As industry AUM grows there is more demand for fund finance”
Risk Management. “Instead, more lenders are starting to expand their current offering to include NAV.”
Lorenzon describes NAV financing as a modern version of a Lombard loan. Lombard loans and NAV financing both involve borrowing
return and risk,” says Lorenzon.
“The risk reward appetite balance has changed since the pandemic, with investors now more sophisticated and pricing risk better compared to an environment where NAV loans
were mostly priced on scarcity.”
NAV finance is generally used when managers are looking for additional capital to further grow the companies that they've already invested in, for instance, follow-ons and M&A. It is also used to finance the managers themselves, although this is now more commonly referred to as GP solutions.
“NAV finance is still in adoption phase,” says Wilson. “There's nowhere near 100 per cent of funds doing it, but more and more funds are seeing that their peers using it. They're seeing how valuable the flexibility of having that tool can be.
“Very often we're doing transactions with groups that are doing a NAV financing transaction for the first time. But once they do it once, they tend to do repeat
transactions. Once they’ve started it, it becomes a strategic tool that they use every time they raise a fund.”
Wilson and Lorenzon both expect to see a wave of new entrants enter the NAV financing market, but they have warned that it may not be easy. Although NAV financing is arguably the most accessible segment of the fund financing market for private credit fund managers, it still requires a certain amount of AUM and expertise.
“It's not easy to launch a new strategy, particularly in a market where fundraising has been difficult,” says Wilson. “But there are a few groups out there attempting to mimic what groups like us have done in this space. They're not really at the stage where there's a significant
amount of lending because they need to raise the capital first. But there are definitely more potential new entrants.”
Instead of competing with established players, many newer entrants are choosing to focus on their own niches within the fund financing space. For example, CFOs are being increasingly used to add liquidity to private credit and private equity portfolios.
In November, Monroe Capital
“
compared to other asset classes, those who have engaged are drawn by its favorable risk-return profile.”
As institutional investors seek out more liquidity and new allocation opportunities, alternative fund managers are ready to step up and deliver even more fund financing solutions. While NAV financing and CFOs are already the domain of the alternatives, there is scope for larger GPs to take a closer look at sublines and the capital call market.
More lenders are starting to expand their current offering to include NAV”
today announced the closing of its inaugural CFO – a $315m portfolio of strategies, including Monroe’s flagship senior secured direct lending and alternative credit solutions platforms, in both rated and non-rated securities.
Carlyle Group subsidiary AlpInvest Partners issued a $1bn CFO in October 2024, in response to demand from its insurer investors.
Investors are also encouraging more diversity in the fund finance space, by showing a willingness to back new solutions which can deliver lower-risk returns during a time of widespread economic instability.
A recent analysis by Moody’s found that among 30 of the world’s largest insurers, 28 per cent intend to increase their exposure to fund finance, including sublines.
“This interest aligns with insurers' growing appetite for diverse segments within the larger private credit ecosystem,” says Aspioti.
“Although our survey found that few insurers have disclosed participation in fund finance
Moody’s expects to see more partnerships in this area, as banks, insurers and other institutions team up with experienced private credit managers to finance these new offerings.
“Banks with long-standing relationships with GPs will remain the main lenders of subscription credit facilities,” says Aspioti. “Non-bank lenders are more active in NAV lending. Non-bank lenders, especially private credit funds, can offer sponsors flexibility and structure transactions tailored to the fund’s needs. We anticipate that banks and nonbank lenders will frequently operate in tandem to meet the industry's expanding demands.”
Fund finance is gaining momentum in the private credit world, as investors and managers discover the liquidity and investment potential of these solutions. While the more established players seem set to take the lion’s share of this market, there are still plenty of opportunities for new entrants who have something new to offer.
This year’s Alternative Credit Awards will take place on 19 November 2025, at the Royal Lancaster London.
The event – hosted by Alternative Credit Investor – is the only dedicated alternative credit awards ceremony in the UK and has quickly become a mustattend industry event.
The evening will comprise a sparkling drinks reception, gala dinner and awards ceremony, commemorating the shining stars of the alternative credit industry.
Fund managers, specialist lenders and service providers will be presented with accolades on the night.
Categories include Fund Manager of the Year, Senior Lender of the Year and Fund Administrator of the Year.
Awards entries are open until 16 May 2025. Please access our dedicated awards website at alternativecreditawards.com for more details.
For sponsorship and table enquiries, please email sales and marketing manager Tehmeena Khan at tehmeena@alternativecreditinvestor.com.
Alternative Credit Investor is hosting the Alternative Credit Investor COO
Summit 2025 on 15-16 May at Chewton Glen Hotel & Spa.
This is an exclusive annual event for senior operational executives from leading private credit firms, held at a luxury five-star hotel that is easily accessible from London.
The overnight event will enable COOs and CFOs to connect and share valuable insights, through a mix of panel discussions, interactive roundtables and networking activities.
The Summit will tackle all the key topics affecting the sector, including navigating new LP requirements, the opportunities presented by AI and macroeconomic challenges.
The event is complimentary for senior operational leaders from alternative credit fund managers, including the overnight stay. Please email editor-in-chief Suzie Neuwirth at suzie@ alternativecreditinvestor.com to request your place.
For sponsorship opportunities, please email sales and marketing manager Tehmeena Khan at tehmeena@alternativecreditinvestor.com.
The Innovative Finance ISA has obvious benefits for savvy investors but it has not yet reached its full potential. Kathryn Gaw asks what it will take to bring the tax wrapper to the masses.
IT TAKES NERVES OF STEEL
to be a stock market investor these days. Stock market portfolios have demonstrated extreme volatility in recent years, sending many investors towards the alternative credit sector in search of fixed, inflation beating returns. For the higher end of the wealth market, there is an array of investment opportunities in alternative credit. But for everyday investors the options are much more limited. Most private debt funds are squarely aimed at institutional investors only, and the few funds that are being marketed to wholesale investors tend to come with a minimum investment threshold
The Innovative Finance ISA (IFISA) was launched in April 2016 with the aim of encouraging retail investors to diversify their portfolios and back British businesses by funding peer-to-peer and crowdfunding loans. But despite its nine-year track record, and the stellar performance of the leading IFISA managers, the investment vehicle has still not taken off.
According to the most recent HMRC ISA data, just 17,000 IFISA accounts were subscribed to during the 2022/23 financial year. By contrast, more than 3.8 million stocks and shares ISAs and 7.8 million cash ISAs were open during the same period.
“ Despite the benefits of IFISAs, many investors remain unaware of the opportunities they offer”
of £50,000 or more. This leaves a substantial segment of the investing population adrift in the search for alternative sources of yield. However, there is another option, which has a proven track record of delivering competitive, tax-free returns to investors with minimum investment thresholds as low as £5.
HMRC estimated that the total value of the IFISA market in 2022/23 was £821m – a drop in the ocean when compared with the £47.1bn that was invested in stocks and shares ISAs that same year.
Meanwhile, according to data collated by the 4thWay P2P And Direct Lending (PADL) Index,
IFISAs have been able to deliver much more consistent returns than the stock market, with average annualised returns for the sector outperforming inflation in nine out of the past 10 years. The PADL Index tracks the performance of six of the largest platforms in the P2P and direct lending space, all of whom are also IFISA managers. Last year, the index reported full year average annualised returns of 7.61 per cent for these IFISA managers. Over the past 10 years, the PADL constituents have earned their investors 7.31 per cent per annum annualised, net of investing costs and bad debts. So what is holding the IFISA back from mainstream success?
“Despite the benefits of IFISAs, many investors remain unaware of the opportunities they offer,” says Hiran Patel, chief risk officer at IFISA manager Kuflink. “One way to improve accessibility would be for regulators and industry bodies to promote greater investor education about IFISAs and how they compare to traditional ISAs.”
The IFISA sector was dealt a blow when the Financial Conduct
Authority (FCA) issued a series of restrictions on P2P lenders in December 2019. These new rules included limiting platforms’ ability to market their products to retail investors, and making all incoming investors pass an appropriateness test before depositing their first funds. The FCA also advised that investors should not add more than 10 per cent of their investment portfolios into P2P loans, while P2P platforms were required to publish visible risk warnings on their websites and all promotional materials. These rules stymied the sector’s
growth, and created a costly administrative burden for platform managers, which led to several IFISA managers choosing to leave the space. A few months after these rules were introduced, the pandemic hit, causing investors to panic and withdraw their investments. This resulted in several more IFISA managers exiting the market.
Today, there are just 64 companies authorised to offer an IFISA, according to the HMRC’s ISA manager register. Yet at least 20 of these firms are either in administration or not open to new IFISA investments. That leaves
approximately 40 players in the market, a mix of P2P lending platforms and wealth advisors.
Kuflink’s Patel believes that choosing the right IFISA manager represents a huge challenge to investors, especially considering the lack of publicly-available data and marketing information available.
Awareness of the IFISA is still very low among retail investors, and even IFISA-aware investors have a mountain to climb before being able to make their first investments.
“For investors considering an IFISA, conducting thorough due diligence before selecting a provider is crucial,” says Patel. “Unlike traditional cash ISAs or stocks and shares ISAs, IFISAs involve lending to businesses or individuals, often through P2P platforms. While they offer higher potential returns, they also carry different risks.”
No two IFISAs are the same, which in itself creates an additional due diligence burden on the investor. As well as learning about the concept of the IFISA itself, investors are also required to investigate each IFISA provider thoroughly before making their choice.
IFISA managers run the gamut from property-backed P2P lending platforms and bridging lenders, to renewable energy funders and
consumer lenders. What’s more, each of these platforms have their own minimum investment thresholds, ranging from £5 to £20,000. This will further limit the options for restricted retail investors.
“The first step in due diligence is to assess the provider’s track record,” says Patel. “Investors should look for platforms with several years of stable performance, rather than new entrants with a limited operating history. Platforms like Kuflink, which have been in the market since 2017 and have demonstrated reliability. Checking how long a provider has been operating, their past performance, and how they have handled defaults or financial downturns is essential.”
This information is available on the websites of each individual IFISA manager, as well as via third party ratings agencies such as 4thWay.
Risk management practices are another critical factor. Investors should examine default rates, how the provider conducts loan underwriting and due diligence, and what security is in place for the loans.
Understanding the loan-to-value (LTV) ratios of the provider’s loans is also important. Platforms with conservative LTV ratios, typically
detailed information on the loans being offered, borrower profiles, and how they have performed historically. If a provider does not disclose default rates, past performance data, or specific risk mitigation strategies, it could indicate a lack of transparency.
Finally, investors should assess the platform’s liquidity and exit options. Unlike other forms of ISAs, IFISAs are not inherently liquid, meaning investors may not
“ A huge number of investors would be perfectly willing to accept that their investments might be tied up for a bit longer”
below 75 per cent, offer a stronger buffer against borrower defaults. If a provider is offering loans with high LTVs or no collateral, it increases the potential risk to investor capital.
Transparency is another major consideration. A reputable IFISA provider will provide clear and
be able to access their funds before the end of an investment term. Some providers offer a secondary market, where investors can sell their investments early, but the existence of a secondary market is no guarantee of a sale. For instance, during the pandemic,
some secondary market transactions took months to complete, while even under good market conditions loan sales can take several weeks.
Choosing an IFISA provider may take some research but the rewards are clear.
“The assets underpinning IFISAs have been around since at least 2005 and the investing performance has been exceptionally good and very stable,” explains Neil Faulkner, managing director of 4thWay.
“Net returns between 5.5 and eight per cent every single year, even through major recessions, pandemics and high inflation, surely will have to earn the curiosity of many millions of savers and investors in the long run.
“The fact that the actual results have not been sufficient to push IFISAs into the mainstream suggests that the right set of luck and circumstances for this to happen simply haven't happened yet.”
Last year, the IFISA rules were updated to remove a previous restriction which meant that
investors could only open one new IFISA account per year. Faulkner hopes this will help to encourage investors to diversify across more providers’ loans, but he is not convinced that this will bring a flood of new IFISA investors into the market.
Last year’s update also extended the remit of the IFISA, bringing open-ended property funds and long term asset funds (LTAFs) under the scope of the IFISA for the first time. Since then, a handful of brokers
and investment managers have entered the space, although at the time of writing, no LTAF provider had yet received IFISA manager status. One LTAF provider told Alternative Credit Investor that it had no plans to apply for IFISA manager status as its LTAF investors were exclusively institutional.
However, it is just a matter of time before the first LTAF or openended property fund manager starts to target the restricted retail market and decides to offer IFISA-wrapped products.
“This shift is undoubtedly creating more competition in the alternative investment space,” says Patel. “However, we see this as an opportunity rather than a threat. Competition is a natural part of a growing financial sector, and ultimately, it benefits investors by providing more choice and better transparency.”
Both Patel and Faulkner believe that more could be done to encourage investors to consider IFISAs. Faulkner has been openly critical of the regulator's “absurdly cautious approach”, which he believes is overweight on liquidity risk and underweight on volatility risk.
“[The FCA] does not seem to realise that a huge number of
investors would be perfectly willing to accept that their investments might be tied up for a bit longer, if it means not all of their holdings are subject to the rollercoaster of the stock market,” Faulkner adds.
Meanwhile, Patel suggests that streamlining the ISA transfer process would make it easier for investors to move funds from low-interest cash ISAs into higher-yielding IFISA options.
Alternative Credit Investor has been covering the IFISA market since 2016 and in that time has reported extensively on the slow growth of the IFISA, and the consistency of the performance of the largest IFISA managers, most of whom have been operational for more than six years with a zero-capital loss record.
These platforms have weathered some incredibly testing economic and regulatory challenges, and continue to offer risk-managed returns of more than seven per cent per year. Perhaps the small size of the IFISA market has enabled this sustainable growth, but as the IFISA segment evolves, investors will have to remain engaged and be prepared to do their own homework in order to reap the obvious benefits of this investment opportunity.
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