Alternatives continue to grow among institutional investors
Senior secured private debt in Australia and New Zealand has been on the rise among institutional and sophisticated investors looking for relative value for their asset allocation mix, according to Revolution Asset Management.
The growth was driven mostly by a number of macro-economic tailwinds, with the most substantial being changes to bank regulations.
Revolution’s chief investment officer, Bob Sahota, explained that due to increased capital adequacy requirements, there was a consistent decline by Australian banks in lending to a number of key private debt sectors, which created a financing gap in Australia and an emerging opportunity for non-bank lenders.
“The new and evolving aspect of Australian and New Zealand private debt is the ability for institutional investors and high net worth individuals to access a larger portion of this market that historically has been the domain of banks,” he said.
According to the firm, Australian private debt was not a new asset class and at over A$2.8 trillion it was larger than each of the Bloomberg AusBond Composite Index, the S&P/ASX200 Index and the Australian superannuation savings pool and was growing at a compound annual growth rate (CAGR) of 7.6 per cent.
“The Australian investable private debt universe is large, but we believe the most attractive sub-sectors (against the current market backdrop) include leveraged buyout and private company debt, private and public asset-backed securities (ABS) and loans to stabilised commercial real estate assets,” Sahota said.
Revolution Asset Management is the appointed investment manager for the Revolution Private Debt Fund I, which invested in the sub-sectors described, and is targeting a return of cash plus four to five per cent per annum.
AUTHOR
Oksana Patron
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
