Ashburton Mezzanine Fund I has successfully reached the first close of its inaugural fund, raising R507.5 million from four investors.<\/p>\n
\u201cThe fund is targeting a final close of around R1 billion and will invest in opportunities in South Africa with an allocation of up to 20% for investments in Botswana, Namibia and Zambia,\u201d said Ashley Benatar who heads the fund.<\/p>\n
\u201cIt offers investors close to equity returns while taking debt like risk. Therefore, on a risk adjusted return basis, mezzanine debt offers investor a compelling alternative to traditional assets given the security and covenants that are in place on a mezzanine investment.\u201d<\/p>\n
The fund is targeting returns of around 20% from investments that achieve current income (in the form of interest) and longer-term capital gains (in the form of equity upside) from a portfolio of investments ranging between R75 million and R150 million each.<\/p>\n
The fund will focus on investing in established mid-market or large companies with profitable track records and experienced management teams. Fund investments will benefit from downside protection based on superior ranking relative to equity investors.<\/p>\n
\u201cThere have been two market declines already in the last 10 years, both with prolonged recoveries which has resulted in low growth and a lot of uncertainty in traditional investments such as equities.<\/p>\n
“This has provided a boost to alternative investments such as mezzanine debt funds as investors seek to find higher yields,\u201d Benatar added.<\/p>\n
Ashburton Investments is the asset management arm of the FirstRand group and will aim to close its first transaction in the next few months, it said.<\/p>\n