FirstRand’s new debt-investment fund to raise R1bn

FirstRand’s Ashburton Investments is starting a new debt-instrument investment fund as Africa’s biggest bank by value seeks to take advantage of lending gaps and opportunities in the south of the continent.

The Ashburton Mezzanine Fund raised more than R500 million ($40 million) in its first round and is targeting R1 billion before closing to investors within the next 12 months, money manager Ashley Benatar said in an email. It will target mezzanine debt.

The fund will be used to invest in opportunities in South Africa and about 20% will be allocated to Botswana, Namibia and Zambia, said Benatar. The fund will target investments of between R75 million  and R150 million and will be sector agnostic, said Benatar.

Mezzanine debt offers investors a “compelling” alternative to investing in traditional assets such as equity, he said. Market slumps over the past decade have lead to prolonged recoveries and low growth in equities, boosting demand for alternative investments as investors seek higher yields, said Benatar.

The fund will target returns of 20% from its investments of between R75 million and R150 million each in established mid-market or large companies with profitable track records. “It offers investors close to equity returns while taking debt-like risk,” he said.