According to Boot, the private market is about “placing loans directly with institutional investors.” He cites insurance companies and pension funds as examples. “Put simply, you have three ways to spend debt,” he explains the situation. “You have bank loans, you have bonds and therefore you have a direct loan from the party that owns it.”
Information technology makes it easier for investors to value companies
According to Boot, the reason the private market has grown so much is due to the way information technology plays a role in society. Big investors can see everything about Vopak, Boot continues. “Investors can more easily evaluate companies and are therefore more inclined to invest money if the information shows that it is a reputable company.”
No formal requirements
Boot points out that there’s not even a formal prospectus or requirement involved, “because it ends up with a direct investor.” “He runs over it, and it’s a grown-up party that needs to be able to keep its pants on.” That’s why investments can be made privately.’
According to Boot, the same computer technology has ensured that if a company like Vopak says it needs 400 million, investors can be leashed without there being a stock exchange. “So, information technology is also the main factor,” he continues.
Recovery
And that’s important, Boot points out. Especially since the same type of market has existed for some time in the United States and Europe is, so to speak, catching up. “So there’s been wilder growth — something you might call ‘direct lending,'” says Boot, who says direct lending is the biggest grower in financial markets. ‘With this market you are also much less affected by the traditional fragmentation in Europe because you can agree with each other what the rules are.’
However, according to Boot, this doesn’t mean that the fragmentation has completely disappeared – quite the contrary. ‘Germany, for example, has a market that is too organized for direct placement, just like France, so there is still fragmentation,’ concludes Boot. “But you can solve it easier. And the pressure to borrow from banks decreases, so banks don’t always have to step in.’