FirstRand fund to target debt

FirstRand’s Ashburton Investments is starting a new debt-instrument investment fund as Africa’s biggest bank by value seeks to take advantage of lending gaps and opportunities in the south of the continent.

FirstRand’s Ashburton Investments is starting a new debtinstrument investment fund as Africa’s biggest bank by value seeks to take advantage of lending gaps and opportunities in the south of the continent.

The Ashburton Mezzanine Fund raised more than R500m ($40m) in its first round and was targeting R1bn before closing to investors within the next 12 months, money manager Ashley Benatar said in an e-mail. The fund plans to target mezzanine debt, a hybrid between debt and equity financing. This is a riskier type of debt, as it does not generally require collateral and ranks behind senior debt in the case of a company defaulting.

In such a case, mezzanine funders can convert their debt into equity.

The Ashburton fund plans to invest in opportunities in SA, with about 20% allocated to Botswana, Namibia and Zambia, said Benatar. The fund will target investments of between R75m and R150m and will be “sector agnostic”, said Benatar.

Mezzanine debt offered investors a “compelling” alternative to investing in traditional assets such as equity, he said.

Market slumps over the past decade had led to prolonged recoveries and low growth in equities, boosting demand for alternative investments as investors sought higher yields, said Benatar.

The fund intends to target returns of 20% from its investments in large or established mid-market companies with profitable track records.

“It offers investors close to equity returns while taking debt-like risk,” he said.

Ashburton’s collective investment schemes notched up R13.8bn in assets as at June 30 2017.

In April, Ashburton named Nkareng Mpobane its new chief investment officer of long-only fund management. Mpobane took over from Paolo Senatore.