November 21, 2019 - The LSTA goes back to Tel Aviv.
This week, the LSTA returned to Tel Aviv once again to discuss the US institutional syndicated corporate loan market before 450 attendees at the Tandem Capital Global Markets International Conference.
Why journey 6,000 miles to discuss the U.S. loan market? There are a number of drivers. First, the Israeli economy, particularly in high tech, has been thriving for quite some time. Second, changes in Israeli laws which require all workers to allocated parts of their compensation to provident funds (similar to 401(k)s), are driving significant sums to insurance companies and other fund managers. As a result, these institutional investors have about almost 2 trillion Israeli Shekels (about $560 billion) to invest and that number is growing very rapidly, expected to reach more than $750 billion in the coming years. Also, the number of very high net worth individuals and family offices in Israel has multiplied recently as a result of the tech boom and other factors. These investors are keenly interested in investing a portion of their assets outside the country.
LSTA General Counsel, Elliot Ganz, who co-heads the LSTA’s Public Policy Group, began the discussion by describing the financial regulatory environment in the United States, noting that the political environment is one of factors important for investors to understand before investing in a foreign country. The presentation is available here. Mr. Ganz identified a few major themes. First, because of the split between Democrats and Republicans in Congress it is very unlikely that any meaningful financial regulatory legislation will become law. Instead, House Democrats are holding a series of hearings on various financial products and introducing “statement” legislation they (they know) will stall in the Senate. On the regulatory side, Mr. Ganz explained that the heads of the financial regulatory agencies appointed by Trump are generally more business friendly than under the previous administration, rationalizing and moderating some of the more severe regulations that came out of the 2010 Dodd-Frank Act, but by no means are they introducing anything that resembles a repeal of the Act. Finally, Mr. Ganz discussed the possible ramifications of the coming presidential election. “Wall Street” has become a popular, populist, target of a number of the presidential candidates some of whom have made sweeping proposals that could materially and negatively impact the way private equity, leveraged loans and other financial products operate. Mr. Ganz ended on a more positive tone, noting that at a recent hearing of the House Financial Services Committee that examined private equity, there did not seem to be a desire by most members of the Committee, including the Democratic majority, to impose radical solutions to problems that could be better served by targeted regulation. Following Mr. Ganz’s presentation, Ted Basta, EVP of Analytics and Investor Strategy, moderated a panel that included Jeff Bakalar of Voya and Thomas Wong of Oak Hill Capital. After a high level review of the basics of the US institutional corporate loan market, the panel described some of the challenges and opportunities facing the market in the coming year. The panel’s presentation is available here.
