Australian private debt specialist, Revolution Asset Management, has opened up its flagship fund in a portfolio investment entity (PIE) wrapper for NZ wholesale and institutional clients.
The PIE feeds into the underlying Revolution Private Debt Fund II, an Australia-domiciled vehicle launched in 2019 targeting assets such as “private corporate loans, real estate debt (no construction or development), and asset backed securities”, the group says in a statement.
Hosted here by FundRock NZ, and featuring Public Trust as supervisor, the new Revolution PIE has an annual fee of 0.93 per cent (or an estimated price of 0.95 per cent including GST).
The now A$2.2 billion Revolution fund invests in both Australian and NZ debt with about 14 per cent (or A$300 million) held in loans on this side of the Tasman.
Overall the firm manages A$2.7 billion on behalf of institutions as well as wholesale and high net worth investors.
Revolution chief investment officer, Bob Sahota, said in a release that the Australasian scope of the strategy provides a measure of diversification for NZ investors.
“The smaller size of the New Zealand market poses challenges for local investment strategies, mainly due to its focus on volatile sectors such as agriculture and forestry,” Sahota said. “The fund presents an opportunity for New Zealand investors to balance the need for local support of New Zealand private industry with access to a broader investment universe, more robust deal flow and overall diversification via the Australian private debt markets.”
Private debt has been an in-demand asset class in recent years as investors seek out alternative sources of return with the global market growing from about US$500 billion at the end of 2015 to US$1.7 trillion by June last year, according to specialist research house, Prequin.
The opportunity set, too, has spilled out from an original focus on institutional investors to the wholesale and retail markets.
Over the last couple of years Australian private debt managers Metrics and iPartners, for example, have hit the NZ market bearing PIEs while local providers such as the Private Capital Group (PCG) are also pitching to investors. PCG launched a wholesale PIE investing into NZ private debt in 2022.
Revolution has been lending to NZ businesses since 2018 but the new fund represents a further commitment to the market, Sahota said.
While the NZ fund strategy matches the underlying Australia-based fund, the PIE is fully NZ dollar hedged with a target annual return of 4 to 5 per cent above the Reserve Bank of NZ official cash rate – after fees but pre-tax.
As per the underlying product, the PIE offers investors the ability to redeem “some or all of their investment quarterly, contingent upon sufficient cash reserves within the Fund”.