Pengana inks $200m deal with Soul Patts in private debt investment play
By David Ross – The Australian – original article
Sydney investment house Pengana has struck a deal with Washington H. Soul Pattinson to offer Australian investors access to global private credit markets.
The move announced Wednesday, utilising a $200m cash injection from Soul Patts, will result in the two groups establishing a suite of highly diversified private credit investments.
Pengana was co-founded in 2003 by Sydney eastern suburbs figures Russell Pillemer and the man who would become Australia’s prime minister, Malcolm Turnbull.
Mr Pillemer said the returns on private debts were attractive, with a major mismatch between demand for credit and its availability as banks pulled back from riskier lending.
He said this left space for private debt investors to make money on the spread.
“You can make your investments now knowing there is a probability or a possibility of a coming recession, you can make your assessments on the fact that interest rates are certainly higher or higher for longer,” he said.
But Mr Pillemer said the key to making the fund work was offering investors a highly diversified set of private debt investments.
“If you want to bring it to direct investors you want to bring in highly diversified exposure,” he said.
“You don’t want to be exposed to particular managers, sectors or specific loans or companies.
“A highly diversified exposure is critical for direct investors; it’s not like for super funds who can have direct investments.”
Mr Pillemer said the firm was set on investing outside Australian markets, noting the concentration of private debt in Australia around property plays.
“We are industry agnostic provided the companies have got strong cashflows,” he said.
“At the moment the only thing that’s really available to investors is Australian private credit and a lot of that is property related; there’s a big empty space out there which could be a very large space.”
Mr Pillemer said private debt lenders, who were heavily into property markets, risked taking a big hit.
“We won’t have such a systemic risk factor because we’re so diversified,” he said.
“Property I’m not negative on it all, it’s not necessarily a bad asset class but we’re providing something that’s very different to that.”
Mr Pillemer said the investment house would spend the coming weeks speaking with clients, in a bid to get commitments from family offices and high-net-wealth investors.
Washington H. Soul Pattinson chief executive Todd Barlow said it was keen to strike the deal with Pengana after being “highly impressed by the portfolio’s investment strategy”.
“On this basis, we have made a substantial capital investment to seed the portfolio,” he said.
