Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The fund was launched in March and closed last Friday with four times the amount it needed to raise. ôWe needed A$25 million to successfully launch World Water, but demand was a lot stronger than we expected,ö says Michael Clapham, head of equities structured products for Credit Suisse in Australia. ôGlobal water consumption is growing at twice the rate of population growth and the interest we received in the fund shows that investors want to invest in and support this very important industry.ö
Credit Suisse enlisted the services of Macquarie Equities and Ord Minnett to help market and sell the product. The fund carries a capital protection which ensures that investors receive 100% of their funds invested (at a price of A$1 per unit) when the fund matures in five years. Investors may also benefit from a rising capital protection feature that locks in higher returns if certain conditions are satisfied. The lock-ins are set at A$1.10 and A$1.50 per unit, and once triggered, ensure that investors receive the higher amount at maturity, less the aggregate dividends over the life of the trust.
The minimum investment in the Water Fund is A$20,000 and the annual fees are quoted as 1.75% per annum.
A senior product developer at Macquarie, Van Oayda, says Macquarie and Credit Suisse listened to the needs of investors before structuring the fund. ôWith Credit Suisse providing a daily bid price on the fund, it is acting as a market maker and addressing the common ætrading at a discount to NAVÆ problem that a lot of funds face. And while PL100 World Water benefits from the capital protection, total fees will be less than 2% per annum.ö
The World Water fund has 15 stocks in its notional portfolio including Severn Trent in the UK, Suez and Veolia Environment in France, Toray Industries in Japan and Ashland in the US. Credit Suisse says no Australian stocks made the cut because they did not meet the fundÆs criteria.
Credit Suisse says the Water Fund is the first of its kind in Australia, and is also the first exchange-listed fund that the bank has launched in the country. ôThis marks a new focus on structured products in Australia,ö says Clapham. ôThe plan is to launch more funds in the PL100 series. Each will have a different theme and invest in basket of stocks based on that theme.ö
On its first day of trading last Friday, 445,429 units in the Water Fund changed hands with the price reaching A$1.06 before closing at A$1.03. Yesterday, it was trading at the same A$1.03 level despite a drop in the broader S&P/ASX100 index for the last two days.
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