In today’s evolving investment landscape, institutional investors are navigating a complex set of challenges.
They often require a reliable income stream in order to meet long-term liabilities, whilst also responding to expectations around responsible and impactful investing. At the same time, businesses across the UK who are seeking capital to scale, are struggling to access funding via traditional routes.
This growing disconnect highlights the need for innovative financing solutions.
Challenges for investors and borrowers
Institutional investors, such as pension funds and insurance companies, are under increasing pressure to find investment strategies that deliver reliable income and measurable impact.
For pension funds, demographic shifts are a key driver. As the population ages, more individuals are drawing down from their pensions, creating a heightened need for reliable, long-term income streams.
Insurers, meanwhile, are contending with regulatory requirements such as Solvency II, requiring them to hold enough stable and secure capital to ensure they can meet their obligations to policyholders, even in difficult economic conditions. Challenging government fiscal positions and more volatile financial markets make traditional fixed-income investments less attractive, prompting a search for alternatives that offer both stability and diversification.
In addition to these financial pressures, is a growing expectation for investors to align their portfolios with investments that contribute positively to the wider society.
On the other side of the equation, businesses seeking to grow are facing a persistent funding gap. Due to regulatory constraints and internal limits, bank lending has tightened since the Financial Crisis and growing fiscal deficits mean that public funding is limited. While equity financing is an option, it often comes at the cost of ownership and control dilution. As a result, many businesses are looking for alternative sources of debt capital to fuel their scale-up ambitions.
Private debt as a bridge
Private debt offers a compelling solution to these challenges.
For investors, it can provide secure, predictable income and portfolio diversification. For borrowers, it provides access to flexible, non-dilutive capital that supports growth without sacrificing autonomy. These characteristics make private debt particularly attractive in today’s environment of compressed yields and heightened regulatory scrutiny.
In fact, the global private debt market is projected to reach $3.5 trillion by 2028, an increase of almost 120% from its $1.6 trillion valuation in 2023, highlighting its significance as a complementary source of capital to traditional bank lending1.
Private debt also plays a critical role in supporting the economy by helping businesses access the capital they need to grow. This is especially valuable for mid-sized companies that are too large for venture capital but not yet suited to public markets. It also aligns with the ambitions of the Mansion House Accord, which encourages greater investment from UK pension funds into high-growth UK businesses.
Importantly, private debt can also align with the growing demand for responsible and impact-driven investing when strategies are focused on sectors such as energy transition, healthcare, infrastructure and regional development.
In this way, private debt can act as a bridge — connecting long-term capital with real-world needs and enabling investors to meet their financial goals while supporting sustainable economic growth.
Our approach to private debt
At Octopus Capital, our entrepreneurial spirit drives us to deliver thoughtful, client-focused solutions. And as we expand into private debt, our approach is no different.
We aim to work closely with clients on an individual basis in order to understand their objectives and build a bespoke investment solution that serves their needs.
Our experience in real estate debt provides a strong foundation for this expansion. Over the past decade, our team has deployed more than £4.3 billion into the asset class, helping to transform underused and neglected spaces into thriving places that create jobs, support local economies, and provide much-needed homes across the UK.
Building on this experience, our private debt platform focuses on four key areas: real estate, infrastructure, ground leases and corporate lending.
At the core of this strategy is our commitment to impact. As a certified B Corp and a leader in responsible investment, we’re focused on directing capital into sectors that matter, such as the energy transition and social infrastructure. This means our private debt solutions don’t just aim to deliver reliable income, they also help scale businesses that are building a better future.
Amid evolving investment and business landscapes, we believe that we are well positioned to meet the growing demand for private debt. With solutions designed to support impactful businesses while delivering long-term value for investors, we’re committed to bridging the gap between capital and purpose.
1. Bisnow, October 2023
