Written by: Elise Moulinier, Senior Principal in Direct Lending at PGIM Private Capital 

A bridge has connected the Île de Ré to the French mainland since 1987. When the sun sets and most day-trippers have left the island, peace and quiet descend. It's a wonderful place to relax with a glass of the island's own Rosé des Dunes and a view of the sea.

Wine production has a long tradition on the island. Freshly caught fish and oysters complement the regional cuisine. Another notable feature are the salt marshes: the sea floods special reservoirs where the salt content is concentrated further. In the afternoon, a thin crust of salt called fleur de sel forms and is harvested. The island's salt has a grey colour due to the clayey soil and is sought after by gourmet chefs for its mildness and variety of flavours.

Resisting forces

In their struggle against the elements and external enemies, the Rétais demonstrated great inventiveness. They also developed a special awareness of risk, as well as a high degree of endurance and perseverance. Whether building dykes, creating narrow streets that offer protection from wind and sun, or constructing defensive structures such as the Fortress of Saint-Martin-de-Ré, the inhabitants took risks that ultimately paid off. Thus, the island, which was once poor, became a pearl characterised by its unspoilt nature and agricultural products, offering a very high standard of living.

Elise Moulinier from PGIM Private Capital

How the characteristics of the islanders are reflected in what we offer

Seeing opportunities, having staying power, assessing risks – characteristics of the islanders – were also characteristics our team showed after the 2008 financial crisis. Stricter regulatory requirements opened up new financing opportunities outside of the banking sector, which benefited companies as well as established private lending providers, pension funds, and insurers. Institutional investors gained access to new, attractive investment opportunities, enabling them to diversify their portfolios further and improved their protection against risk. Because even in times of crisis, private lending offers a certain level of stability and independence from the ups and downs of the stock market.

European mid-market attractiveness

Private lending is a business that relies on in-depth knowledge and long-standing relationships. Therefore, maintaining local contacts is a top priority. And not just on the Île de Ré, either. PGIM Private Capital has 47 teams working in 15 offices across three continents. In total, we manage assets worth over €100 billion. We place great emphasis on conservative underwriting. Our goal is to be the main lender in order to have direct access to the borrower, be in control, and thus keep risks comparatively low.

Today, we find investment opportunities in a wide range of industries. In France, for instance, we have recently financed a veterinary clinic and a nationwide automotive service company. And even if it may take time to build the bridge between companies and investors, our detailed due diligence helps keep our default rate very low.

Here, the European mid-market is particularly attractive. It accounts for almost 30 per cent of the total market, but many large providers consider it too fragmented. They shy away from the sometimes more complex structures and smaller industries. However, the SME sector offers issuers good terms, lower debt ratios and higher returns. The key lies in a combination of core competencies: origination capabilities, relationship, risk awareness, patience and tenacity.