Larger companies are increasingly overlooking banks to instead focus on the corporate bond sector, according to Legal & General Investment Management’s Ben Bennett.
Bennett, a credit strategist at Legal and General Investment Management (LGIM), asked whether a consequence of the financial crisis is larger companies taking their financing requirements directly to the market, rather than relying on the traditional role of the bank.
“With banks still on the ropes and unable to provide the financing for the economy to get into gear, it is logical for borrowers to go directly to the savers and cut out the middle man,” he says.
The amount outstanding of sterling corporate bonds has leapt significantly since 2008, from £235 billion to over £270 billion as this becomes an increasingly attractive option for those who have the option available to them.
Bennett says smaller borrowers could band together to access the market: “While this is already happening for those fortunate enough to have sufficient scale, small borrowers need to club together to get the same benefit.”