Metrics scales new heights, increasing sustainability and diversity for investors
Metrics Credit Partners 10th year was marked by a doubling of assets under management and major additions to its capabilities, says Managing Partner Andrew Lockhart.
Scale, sustainability, and diversity have been important themes for Metrics this year as we continually seek to improve our offering to borrowers and investors. Each of the year’s highlights have added to at least one of those themes, be it sourcing new wholesale funding from New Zealand and Japan, significantly enhancing our environmental, social & governance (ESG) capabilities, adding small to medium enterprise and real estate equity financing to our offering, growing our team to 100 people, or delivering returns above target for all our funds.
As Metrics closed out its 10th year in business, our funds loaned to businesses surpassed $10 billion – nearly double what it was at the end of 2020 – in turn providing unique and increasingly valuable sources of returns to investors. In a truly transformative year, Metrics has built a platform from which to consolidate and grow its position as the leading provider of non-bank finance to Australian corporate borrowers and a significant player in private debt, equity and real estate markets – the fastest growing part of the Australian financial services landscape.
In March, Metrics added $1.2 billion of leveraged loans and asset-backed finance to its existing portfolio with the acquisition of the Investec loan book. On the funding side, retail, bank and wholesale markets have all been used to expand Metrics’ capacity. Metrics launched two new funds tapping into investors in New Zealand and Japan to fund lending opportunities in Australia and New Zealand in what has been our first efforts to expand offshore. Both of our listed funds – Metrics Income Opportunities Trust (ASX: MOT) and Metrics Master Income Trust (MXT) – completed placements and entitlement offers that will underpin their continued growth. And we agreed with a syndicate of three banks to upsize a credit facility for the Diversified Australian Senior Loan Fund to $1.35 billion.
There is a purpose and value for our borrowers and our investors in all these initiatives. It is not growth for its own sake. Rather, the increased scale makes us more relevant to Australian borrowers by allowing us to lend in larger volumes to a wide array of businesses. In turn it also increases portfolio diversification in our funds, which enhances capital protection and returns for our investors.
It is true that investors need to diversify their exposure to growth assets such as equities by looking to international markets. But that is not the case in private debt. While European and US markets were quicker to develop the potential for increased yield and diversification in private debt, local investors no longer need to look to abroad or adopt the costs and risks of foreign currency that go with them.
Those opportunities are now available in Australia. The concentration of banks in Australia and their move away from business lending has provided a lot of opportunities for firms like Metrics to step in and, in doing so, develop sophisticated private debt investments. Over the five months to the end of November, Metrics completed in excess of $3 billion in new funding across more than 100 transactions. The pipeline of new transaction opportunities exceeds $6 billion.
Private debt is a fast-growing market in Australia. Investors can get exposure to a wide range of Australian companies operating under Australian law and with an insolvency regime that protects their capital. In addition to our corporate lending, Metrics activity in the second half of the year has focused on commercial real estate and leveraged and acquisition finance. With mergers and acquisitions activity at a five-year high, the firm has provided $1.4 billion in loans to this segment this year.
As part of its commitment to sustainable finance, Metrics this year refreshed its ESG policy and partnered with groups including the Climate Bonds Initiative and the Investor Group on Climate Change that are focused on addressing the challenges of global warming. We have an experienced investment team focused on Sustainable Finance as part of a continuing company-wide process to develop new products and capabilities that will support borrowers and investors to meet their sustainability goals.
Since we launched our first wholesale fund in 2013, Metrics has demonstrated its skills in assessing risk, lending and capital preservation. That in turns gives us confidence in bringing further opportunities to investors to diversify their portfolios. In November, we acquired the fintech business called Bigstone Capital to accelerate our expansion into lending for small and medium enterprises and small commercial property developments. Our capabilities will soon extend across the spectrum of businesses who are helping to build the Australian economy.
We have also launched our Metrics Real Estate Partners business, which will allow Metrics to co-invest alongside our real estate clients. This is part of an evolution for Metrics from private debt into the wider private markets that include equity and real estate. Metrics has the skills to bring investors private market transactions and has demonstrated a track record of properly analysing and assessing the risks of these opportunities. Investors in some of our funds have already experienced the benefits of this wider approach using warrants and options that deliver equity participation alongside our lending, and Metrics aims to continue to build this part of the business to expand the range of private market opportunities we can bring to investors.
After a transformative year in which we significantly increased the scale, sustainability and diversity of Metrics’ offering, 2022 will be a year for us to further consolidate these initiatives, building into a business that meet the needs of our clients and investors.
Andrew Lockhart, Managing Partner at Metrics Credit Partners, provided insights into the opportunity and outlook for Australian private debt in…