Connaught forecasts the future of the astl

Connaught forecasts the future of the astl


Following the recent news that the astl’s current Chairman, Adrian Bloomfield, is to resign from his position, three new additions to the Association’s membership have been announced. The most recent high profile member, Connaught Asset Management, is set to bring the trade body increasing diversity and more influence in the conduct and promotion of the industry as the funding provider of some 18 per cent of the short-term industry.

In light of this move, B&C caught up with Mike Davies, Chairman of Connaught Asset Management Limited, to ask why the funding provider has decided to join the Association now, its views on astl’s next Chairman and its future within the bridging market…

Why has Connaught chosen to become members of the astl now?

Our relationship with short-term lenders, Tiuta in particular, through the Connaught Income Fund has taught us a great deal regarding their importance in the UK property market. The short-term lender has become a major player in financing property development now that the more traditional sources of development finance are in short supply.

With much of the developments they finance being residential property for letting and the continuing rise of what a letting agency recently called the ‘professional renter’, i.e. people who are now making a lifestyle choice to rent in the long-term rather than buy, it could be argued that the short-term lending community is ‘punching above its weight’ in terms of their impact on the availability of good quality letting property. 

The wider market is now starting to realise just how worthwhile this industry is and how much we should be lending our support to bolstering the image, influence and culture of this important financial group. We can best do this, not just by continuing our financial support but, by aligning ourselves more closely with the group’s aims by becoming a member of its specialist trade association. 



Connaught operates what is called an unregulated collective investment but which is in many ways closely regulated. With the looming regulatory pressures on short-term lenders through not just the MMR but moves to regulate secured lending and, not forgetting Europe, through the European Consumer Credit Directive, we believe that both Connaught and the astl will benefit by us joining an association that can influence change in this fast-moving environment. 



What do you think Connaught will bring to the association in terms of added value for the current membership?



As a firm we can contribute to the debates that must take place over the next few years as different forms of regulation start to bite, or at least begin to show their teeth. Short-term lenders will inevitably know their own business better than we do but Connaught and individual directors have significant experience in dealing with consultation by regulators, interpretation of regulations and, finally, the implementation of those regulations when measured against a business’s own needs, culture and structure.  



At Connaught, we can lend a lot of expertise to assist in the development of an astl stance but also in assisting individual members with their own interpretation of rules and regulation. We also have risk management, financial accounting, and secured loan underwriting and arrears management in our group CV – I’m sure the astl and its members can find some use for that experience at the right time. Connaught does not intend to be a passive associate member, just paying the annual fee with no other commitment, but we will attend meetings and play as full a part as the Association’s constitution will allow.



The astl has been in the press recently with regard to a new Chairman – do you think that the astl will be renewing its value within the market with a new front to the Association?



This could easily go either way. Adrian Bloomfield is known throughout the short-term lending industry and had a profile. A new Chairman will have an opportunity to stamp his or her own personality on the Association at a time when arguably significant change is happening now and will continue to happen over the next few years.



We believe that this change in the front man or woman is an opportunity for the association to reflect on what it wants to achieve from this change and have very clear objectives agreed with that person. We believe the astl will renew its value within the market if the members fully support the new Chairman, give the Chairman clear objectives and seek dialogue with the other trade associations.



The new voice, combined with the experienced voices of the other associations, including the CML, could become a force to be reckoned with. Individual firms in the market need to recognise that in some circumstances, particularly when dealing with a potential regulator, an industry voice shouts a lot louder than individual company leaders.



Who would Connaught like to see in place as the new Chairman? 



We wouldn’t presume to tell the astl who but from our corporate experience a job role description would include:



A relevant professional qualification (sadly the new Chairman will be judged on this by some of the people he/she meets) - it certainly would do no harm to go for a general banking qualification, such as a membership of the Institute for Financial Services (the old Chartered Institute of Bankers), as this would mean a good grounding in the law, finance and credit risk.



A good team person. The role of Chairman of an association works only where you have the support of the members or at least a general consensus regarding your aims and responsibilities. The days of the diva Chairman are long gone; the Chairman is head of a team and not a ‘strong minded’ individualist.



A very good communicator. I would like to see a Chairman who becomes the true voice of the membership to the outside world. Someone who talks to politicians, regulators, the press and the public and who gets them to listen. I’m thinking of someone like Robert Sinclair of the Association of Mortgage Intermediaries, whose opinions are regularly sought by the press and who is happy to give them in the knowledge that they reflect the attitudes and aspirations of his membership (note to head-hunters – Robert is not looking for a job so far as we know).



Someone who is a good time manager and organiser. The astl does not have a huge infrastructure, head office and administration. I believe Kay Woolley is a great right-hand lady but the new Chairman will have to fit a lot of work and networking into their personal schedule, with limited resources.



Is Connaught looking to increase the funding it provides to the bridging industry?



I would hesitate to say never and, of course, we are always happy to explore additional relationships if we believe they will be to the benefit of our investors.  Let’s just say, our first loyalties must be to our existing partners but if a proposition is complementary to our current partnerships then of course we’ll talk to other lenders.



Does Connaught have any predictions about the outcome of astl’s quarterly data or observations about the current bridging market?



Getting our crystal ball out, we see the following:



The short-term market continuing to expand over the next 12 months as long-term lenders remain risk-averse by lending only to a very limited group of borrowers. This expansion is limited only by the availability of funding, which is where we come in.



More short-term lenders will enter the market as they see just how profitable it can be, but with a shortage of funding there is a risk that the market will be served by a growing number of smaller lenders who could fragment the market.



The current level of interest rates chargeable in the short-term market will remain for at least the next three years, mainly because of demand ‘pull’, as the economists call it. However, we also see the gap between long-term and short-term rates start to close as long-term lenders’ standard variable rates start to increase.



MMR having very little short-term impact as the bulk of short-term lending business is in unregulated lending. However, the Treasury has said it will review the buy-to-let market and we can see some regulation coming to protect what the FSA might call the ‘hobby landlord’. Regulation of the secured lending market by the FSA will have some impact but the unknown is the European Consumer Credit Directive and this is where the astl and its new Chairman needs to be keeping an eye on Europe. Also, the FSA-regulated lenders are already aware that a regulated mortgage book might be a small percentage of their assets but it’s 100 per cent of its regulatory risk.



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