Securing Fund Finance Future through Efficiency and Risk Mitigation

Illinois-based attorney Zac Barnett is a market expert with over 20 years of experience as a lawyer in various sectors. Having graduated from Elmhurst College with a degree in marketing and Northwestern University School of Law with a juris doctor, attorney Zac Barnett is deeply knowledgeable in matters of fund finance.

The fund finance market has experienced phenomenal growth in recent years. It has offered alternative asset managers a low-cost liquidity source and helped financial institutions manage their portfolios and hedge risk. Yet, despite technological developments and other advancements, not much has changed in the fund finance space. What then is required to maintain the staggering growth in this sector? The fund finance space can experience rapid growth by driving efficiency and mitigating risks from conflicts of interest.

Players in the fund finance sector can drive efficiency in various ways. One is to acquire a clear and precise understanding of the fund and the needs of its investors. Successful market players collaborate with other lenders to ensure that their fund sponsor clients’ needs are addressed, whether or not they are involved in the transaction. Another way to drive efficiency in fund finance is through coordination. By working together, stakeholders can avoid duplication of effort and ensure that all tasks are done on time.

Besides efficiency, the future of fund finance also depends on the sector’s ability to address conflicts of interest. Conflicts may arise due to the lender charging higher interest rates than usual, lending more money than prudent, or bias, among other reasons. Market players can mitigate these conflicts by engaging third-party advisors to monitor the fund and its activities and implementing a conflict of interest policy that calls for the disclosure of interests by all parties involved.