16 Jun 2020

How does Investec look at private equity professionals’ income differently?

  

Nearly half (43.5%) of private equity (PE) professionals surveyed as part of Investec’s 10th annual GP Trends survey feel that lenders struggle to understand their income, which could make it difficult for many to build meaningful banking relationships and secure funding.

 

Private Banker Martyn Smith notes “We’re able to consider things like bonus payments, carried interest, co-investment or foreign currency income when examining affordability, looking at a client’s entire situation.”

 

Investec has a dedicated team of specialist bankers focusing on the PE sector, each with an in-depth understanding and wealth of experience in lending to clients in this space. We understand the nuances of their income profile and asset base and how that can vary from firm to firm.

 

We’re particularly comfortable working with people who are at the inflexion point of their career, whose income or employment status has recently changed as a result, adding value when we extend finance to them. 

Martyn Smith
Martyn Smith, Investec Private Banker

We’re able to consider things like bonus payments, carried interest, co-investment or foreign currency income when examining affordability, looking at a client’s entire situation.

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Private Banker Charlotte Seward adds, “Investec has a reputation for winning deals with clients when they’re on an upward career trajectory. We take a pragmatic view of income and assets and can be forward looking in terms of a client’s ability to service debt. For example, a new Partner will go from being employed to self-employed, so we can look at their track record and firm’s history to assess the affordability.”

 

Real-time communication is also important. Investec’s Private Bank credit function reviews every day, which Charlotte points out, “helps us make decisions quickly. Speed is often of the essence and this allows our clients to be nimble in competitive processes."

 

We’re able to help clients with lending, transactional banking, foreign exchange (FX) and deposits, as well as working with our corporate banking (CIB) and wealth and investment (W&I) teams to present private equity professionals with a truly holistic offering.

Charlotte Seward
Charlotte Seward, Investec Private Banker

Investec has a reputation for winning deals with clients when they’re on an upward career trajectory. We take a pragmatic view of income and assets and can be forward looking in terms of a client’s ability to service debt. 

Read how we’re helping our Private Equity Clients’

We helped a client who was looking to purchase a new family home.

They had just become Partner of a UK PE firm and therefore part of the equity partnership which meant their employment status had shifted from employed to self-employed, with no traditional track record of earning in this way. 

We enabled the client to purchase his new family home before having sold the previous one.

An increasingly high proportion of my clients work for firms with an international focus and have a spread of currencies in their income streams to reflect this. One particular client is a MD who recently moved from one global PE firm to another, earning his base salary in GBP, but taking his bonus and carry in EUR. 

We helped a client who was looking to purchase a new family home.

They had just become Partner of a UK PE firm and therefore part of the equity partnership which meant their employment status had shifted from employed to self-employed, with no traditional track record of earning in this way. We took a holistic view of the client and the PE firm to get comfortable on the ongoing viability of their new priority distributions so we could take these into account.

This enabled us to reach a higher mortgage amount so the client could purchase a property at the top end of their budget. We were also able to leverage our corporate lending team’s knowledge of the firm to justify a degree of interest only borrowing, to be repaid by future co-investment and carry distributions.

We enabled the client to purchase his new family home before having sold the previous one.

An increasingly high proportion of my clients work for firms with an international focus and have a spread of currencies in their income streams to reflect this. One particular client is a MD who recently moved from one global PE firm to another, earning his base salary in GBP, but taking his bonus and carry in EUR. Considering foreign income or assets within a credit application can have additional complexities and some lenders back away from doing so as a result. We were able to understand his income profile, including anything taken in foreign currency – this was particularly complex as his bonus history was from another firm – as well as take a forward-looking view of the client’s potential earnings. 

We were able to reach an acceptable LTV, with capital reductions required over the course of the mortgage term to align with the EUR carry distributions, and our FX specialists can help with forward contracts to lock in attractive rates for these known GBP liabilities. Our solution enabled the client to purchase his new family home before having sold the previous one.

Speak to a Private Banker about your needs