Banks can no longer fully fulfill their original economic role as intermediaries between the capital market and companies due to increased core capital requirements and are increasingly financing fewer SMEs with weaker credit ratings. This development plays into the hands of the loan funds. Last year, credit funds (debt funds) succeeded in maintaining their market share of around 26 percent in the German leveraged finance market, which they had captured in 2014. A further shift in market share is expected in the German financing market for private equity deals.

The efforts of the European Central Bank (ECB) to date, such as the the introduction of a penalty interest rate on deposits, have not been able to have the hoped-for effect and have failed to boost the willingness of European banks to invest. Deposits from European banks have increased more than tenfold since June 2014 to date, so German companies increasingly need to consider alternative forms of financing besides traditional bank financing to meet their investment needs.

A look at the U.S. shows very clearly the direction in which the supply of credit for SMEs will develop over the next few years. In the United States of America, corporate financing consists of about one-quarter bank financing and about three-quarters alternative forms of financing. By comparison, two-thirds of German companies are financed by banks and one-third by alternative forms of financing.

Tripartite division of the credit market

We believe that the German credit market will split into three parts. Alternative financiers such as Patrimonium, which manage institutional investor money in lending funds or private debt funds, will fill the financing gap left by traditional financial institutions. This will not happen in competition with the established banks, but increasingly - as can be seen in the American example - in partnership with the traditional banks.