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Fund managers targeted in $20bn debt opportunity

Fund managers targeted in $20bn debt opportunity

James Mitchell
— 1 minute read

EXCLUSIVE A Sydney finance broker has revealed plans to partner with global fund managers in an effort to secure up to $20 billion for infrastructure deals across Asia.

Acuity Funding, an Australian commercial finance specialist, has announced plans to venture beyond the big four banks as the group works to secure funding for major real estate and energy projects across the Asia-Pacific region.

Speaking to Investor Daily, Acuity Funding managing director Ranjit Thambyrajah said the company has received strong demand from major developers in Vietnam, Singapore, Malaysia and Cambodia looking to secure funding for hotels, property developments and major infrastructure and transport projects.

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“After 35 years helping major Australian property developers and businesses secure finance, we are now working with a number of major international clients,” Mr Thambyrajah said.

“Over the last six months we have been extremely busy working with our overseas clients who require significant funding for complex projects that are simply too large for the balance sheet of Australian banks.

“From infrastructure projects in Vietnam and Nepal to public utilities in Cambodia, these are major investments that require an experienced funder with an appetite for emerging market debt.”

EMD experiencing strong recovery

In April, Adam McCabe, head of fixed income – Asia and Australia at Aberdeen Standard Investments, told Investor Daily that 2019 has seen an “eye-catching recovery” in emerging market debt (EMD) after a challenging 2018.

“We remain relatively optimistic about the outlook for EMD in the rest of the year,” Mr McCabe said.

“This reflects big improvements in terms of two of the most important headwinds of the previous year, namely the global monetary/liquidity backdrop and US/China trade relations.”

Acuity Funding confirmed that it is talking to a number of large hedge funds overseas.

“It is quite unprecedented for an Australian finance broker to be working on deals of this scale,” Mr Thambyrajah said.

“The funders we’re engaging are attracted to long-term debt in rapidly expanding economies through projects that will deliver a positive social impact for the local population.

“The projects we are securing finance for are new rail systems, large residential developments and power stations across the Asia-Pacific. These are assets that provide affordable housing and energy to largely impoverished nations.”

Mr Thambyrajah said Acuity is also engaging sovereign wealth funds and offshore pension funds.

“These transactions are a good fit for large funds looking for yield in an environment where interest rates globally remain low,” he said.

Search for yield grows stronger

The Reserve Bank cut the official cash rate this month to a new record low of 1.25 per cent. More rate reductions are expected.

AMP Capital chief economist Shane Oliver said the low interest rate environment means the chase for yield is likely to continue supporting commercial property, infrastructure and shares offering sustainable high dividends.

“The grossed-up yield on shares remains far superior to the yield on bank deposits,” he said.

“Investors need to consider what is most important – getting a decent income flow from their investment or absolute stability in the capital value of that investment. Of course, the equation will turn less favourable if economic growth weakens too much.”

Mr Oliver expects another 25 basis point rate cut in the next few months and two more rate cuts by mid next year, taking the cash rate to 0.5 per cent.

 

Fund managers targeted in $20bn debt opportunity
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