A group of institutional investors including the Wiltshire Pension Fund in the UK has committed to investing $400m (€369m) in emerging markets transition debt (EMTD), via a strategy that invests in both public and private debt.
The vehicle is the Emerging Market Transition Debt (EMTD) strategy, managed by investment firm Ninety One, and was launched late last year at COP28 in Dubai. Ninety One, which describes the strategy as a debt portfolio focusing on investments in clean infrastructure, clean technology, and decarbonisation, today revealed the $400m level of commitment received.
Alongside Ninety One and the Wiltshire Pension Fund, Canadian pensions institutions CDPQ and OMERS, and Legal and General Investment Management are also among institutional investors acting as anchors for the strategy, according to Ninety One.
Jennifer Devine, head of the Wiltshire Pension Fund, told IPE that the UK pension fund had, as a founder investor in the EMTD, funded the investment with £50m early this year.
“This is a really exciting strategy, investing in both listed and unlisted debt in emerging markets, financing companies which are either currently highly-emitting or providing solutions on their transition journeys,” she said.
“This fund is part of our innovative Climate Opportunities (Clops) portfolio, which is a multi-asset portfolio aiming to earn superior risk-adjusted returns by investing in a diversified mix of assets which have the intention to deliver real world change by actively supporting the transition to a low-carbon economy,” she said.
Nazmeera Moola, chief sustainability officer of Ninety One, told IPE the strategy invested in both listed and private debt.
“Therefore this provides access to the full transition opportunity set as many of the relevant companies are corporate bond issuers,” she said.
Another advantage of this for investors was, she said, that the combination also provided interval liquidity, so investors were not locking up all their capital for an extended period of time.
Asked about the kind of response there had been from institutional investors so far for this strategy, Moola said it had taken time to get investors comfortable to invest in EM credit – a large portion of which would be private credit.
“We have seen a handful of pioneer investors take active steps,” she said.
“However, we are now seeing growing interest – helped partly by the expected peak in the US interest rate cycle,” said Moola.
The $400m target is expected to rise over time, she said, with the firm seeing “a healthy pipeline of interest”.
“The vehicle structure is open-ended, and thus allows investors to enter on an ongoing basis,” she said.
Hendrik du Toit, chief executive officer of Ninety One, and co-chair of the Investor Leadership Network, said that, so far, institutional investors’ investment in emerging markets had been largely focused on public listed equities and sovereign debt.
“However, much of the investment in the energy transition – particularly in middle-income emerging markets – is required in the form of private equity, private debt, project debt and corporate debt,” he said.
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