Nonbanks' local buy in: introducing the investors

KangaNews speaks to four Australian fund managers with a track record of investment in nonbank securitisation. The firms are diverse, as are the factors attracting them to the nonbank sector. The common factor is a similar view of the positive risk-reward equation these issuers can offer.

Challenger Investment Partners (Challenger) manages A$15.9 billion (US$12.5 billion) across fixed income and real estate globally. Of this, around A$4.5 billion is invested in securitisation markets in Australia and offshore according to portfolio manager, Steve Martin.

Challenger is a relative-value investor. It was one of the largest nonbank issuers of RMBS from 2004-07, and therefore has a long history of participation in Australian securitisation markets. Today, Challenger ranks as one of the largest institutional investors in the sector.

IFM Investors (IFM) manages A$98 billion with debt comprising a third of the total. Scott Barker, the firm’s regional head, Asia Pacific, says it tends to focus on credit and often what might be regarded as “non-mainstream credit”. Since 1999, Barker says, IFM has “sought to find value for our investors that perhaps isn’t as obvious to mainstream fixed-income investors”.

This has included securitisation for many years. Here, Barker says IFM is in fact most active outside the major-bank sector including nonbanks. The firm also has a long track record as a buyer of middle-to-lower rated tranches in securitisation deals.

Kapstream Capital (Kapstream) is a debt-specialist fund manager with more than A$11 billion under management. It is “pretty constructive” on structured finance, according to portfolio manager, Dylan Bourke, and the asset class comprises around 10 per cent of Kapstream’s portfolio in Q3 2017.

Bourke continues: “Nonbanks make up a substantial portion of our structured-finance exposure at present. It makes sense to us to pick up some spread in an asset class we view as being slightly less liquid in general, provided this spread comes from what we consider to be high-quality collateral – which it does.”

Realm Investment House (Realm) is a boutique fund manager that invests across the fixed-income landscape – including rates and credit product – but has a notable affinity with structured finance.

Rob Camilleri, investment manager at Realm, says the firm has a long-term strategic asset allocation of around 30 per cent to the securitisation asset class. However, it is currently somewhat below this level, at around 18 per cent, based on a relative-value view and Realm’s cyclical outlook.