Consider leverage

Finance | 1 Apr 2007

Following high-profile bond issues in 2006 by the Wellcome Trust and the International Finance Facility for Immunisation, charities should consider the benefits that can be gained from leverage.

Peter Capel and John Mayne from JPMorgan explained that while leverage is not for everyone, it is relatively straightforward to borrow, it is low-cost and low-risk if approached sensibly, is highly flexible, investors have huge appetite for diversified credit exposures, and gives charities the potential to do more.

They argued that charities can achieve a more efficient capital structure by 'taking advantage of and leveraging the cash flows and valuations of portions of their asset base'. They cited the long-established track record of US foundations effectively utilising the debt capital markets, such as Harvard University and the Getty Trust.

Directory: JP Morgan Asset Management

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