Diversifying funding sources has been a driving force behind investors' re-financing decisions this year, according to investment manager M&G Investments.

M&G has provided GBP 4.9billion of private financing to corporates and institutions in the past 12 months, as pension funds and institutional investors continue to seek the secure, and often inflation-linked, cash flows provided by these investments.

"Investments are now being made in a variety of structures, whether it is a private loan to a company alongside the traditional banks by our direct lending team or the realisation of operating assets' value through a sale and lease back deal, companies are working with M&G in order to create a bespoke solution," said Mark Hutchinson, co-head of alternative credit.

"A desire by corporates and institutions to diversify their funding sources has been a driving force behind decisions to refinance and seek additional funding from different sources this year," he added.

M&G has continued its programme of lending directly to medium-sized companies with the M&G UK Companies Financing Fund 2 lending over GBP 130 million in the past 12 months.

It has invested also almost GBP 500 million to larger corporates mainly through private placements, which continue to be an important funding source.

"A new financing landscape has emerged following the financial crisis in 2008, where pension funds and institutional investors, the natural owners of long-term capital, are providing finance over the long-term in areas where banks previously dominated the market," said William Nicoll, co-head of alternative credit at M&G.

He added that pension funds are attracted to the often enhanced structures private investments can offer, providing greater stability for trustees.

"Pension funds have continued to invest in areas such as social housing, which can provide both income and protection from future rises in inflation over the long-term," he said.

First published 18.12.2014

Lindsay.sharman@wilmington.co.uk