The executive director of alternative debt at $6.7 billion Hastings Funds Management expects the Australian debt market to no longer be the purview of the country’s banks.
Steve Rankine reckons the local bond market will open up to a broader investor base.
He says higher equity levels demanded by the Bank of International Settlements will not allow banks to hold as much debt as before.
Institutional investors and those about to retire or are retired will buy more bonds because of their perceived steady income. Infrastructure debt will be in demand due to the stable nature of infrastructure assets and cash flow, he says.
“I haven’t seen it as good as this in my career for infrastructure. Everyone’s infrastructure is poor,” says Rankine.
“The business will be around for the long term. Institutional investors are the right people to fund it, not the banks.”
To capitalise on his forecast of better business, Rankine has hired Nick Cleary, who will eventually work in Hastings’ San Antonio, Texas office.
Cleary will be responsible for asset management, capital raising and origination.
Tim Cable will be based in London and will have the same responsibilities as Cleary.
Melbourne-based Hastings was founded in 1994 by Mike Fitzpatrick.
In 2005 he sold the firm to Westpac for an undisclosed sum.
The bank has about an 85-per-cent stake in the firm. The remainder held by Hastings staff.
Hastings’ Utilities Trust of Australia, an open-ended unit trust that invests globally, has had an annual return of 11 per cent since it was established in 1994.
The Hastings Yield Fund, established in March 1999, has had a gross return of 8.6 per cent a year since inception.
The firm invests in Australia, Europe and the US. Rankine had been working in London for three years and has just returned to Sydney.
“Debt is a natural part of the capital structure,” he says. “I just want to build it up.”