The asset management industry will struggle to provide enough capital to address the solvency problems of UK public firms as they emerge from coronavirus lockdown, an asset management boss told the Financial Times.
The stark warning comes from Fidelity International executive Anne Richards, whose investment company oversees £305bn in client assets.
Richards said many businesses would need an injection of capital to offset the high levels of debt they had accumulated during the pandemic, whilst being unable to operate.
But these businesses will need access to a range of capital pots because the asset management industry "is not going to be enough to solve this solvency problem,” said Richards.
She expects much of the debt to be written off or to sit on balance sheets where it will have a "depressing effect".
“If you don’t want that drag from the overhang to depress the recovery, you have to think about the plan to recapitalise. The [fund] industry can support a high proportion of that, but I don’t think it can do all of that recapitalisation,” Richards told the FT.
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The UK has already seen a surge in fundraisings as companies have tried to deal with cash flow problems. More than 50 share placings have occurred during April and May, according to tech platform PrimaryBid.
And more companies are expected to turn to share sales in the months ahead in order to balance debt to equity ratios whilst other may try to build cash piles to enable them to buy up other struggling businesses.
But Richards warned there is not a huge amount of cash quickly available to support companies, despite fund managers globally having larger cash piles than usual.