In March 2020, the European Securities and Markets Authority advised that funds totalling €100bn gated or applied other extraordinary liquidity measures. At the same time Carl Icahn, one of Wall Street’s most successful investors, announced his biggest position was a short on the CMBX 6, an index of commercial real estate debt. Twelve months on, and several stimulus measures later, the next “Big Short” has not yet materialised and while the outlook for commercial real estate appears challenging at best, I believe the enactment of the amendments to Ireland’s Investment Limited Partnership Bill offers some rays of hope. Investment managers chasing growth in what seems to be an inflated equity market are looking at opportunities in the alternative space. PIMCO has raised $5.5bn for investment in private credit funds, HPS Investment Partners have committed $5bn and Kennedy Wilson and Fairfax, to name just a few, have set aside $2bn with Ireland identified as their most important market outside of the US. The private credit market has been identified as the ‘best place to invest’ right now according to Anastasia Titarchuk, Chief Investment Officer of the New York State Common Retirement Fund.
Reflecting on our domestic market, the Central Bank of Ireland has noted 35 percent of commercial real estate debt is held by Irish funds representing a diversification from domestic to international investors and more than half of that is in funds with an LTV greater than 50 percent. With tightening of the debt markets, it is inevitable that activity in this space increases as we look to navigate our way out of the pandemic.
Previously even the Ireland Strategic Investment Fund (ISIF) had been forced to use Luxembourg-domiciled vehicles to fund certain projects but with the amended Investment Limited Partnership Act, we can expect to see a significant increase in the number of managers utilising this vehicle as it:
The stats make for a compelling case. Over the last five years, 3,300 private equity funds have launched in Europe, the vast majority private partnership structures and despite being the second largest funds hub in Europe, we didn’t benefit from these launches. As a result of these changes we are now well-positioned to grow. Irish Funds estimate the new legislation will result in an inflow of $20bn per annum in private capital and the creation of up to 3,000 jobs which I have no doubt will help kickstart our economy with a timely injection of capital. Reflecting on the pandemic, you have to dig deep to look for opportunities but with the amended Investment Limited Partnership Bill passed into legislation, I have no doubt this is one.