The launch of these new share classes was prompted by increased investor interest in the Fund’s strategy from both institutional and advisory clients. The new classes will help to generate more liquidity for investors’ portfolios that will be similar to a bond coupon or an equity dividend.
Although Prime Alternative Finance only launched in December 2018, it is expected to surpass USD50m AUM sometime in Q4/2019 and operates in a similar way to the long established ‘Prestige Alternative Finance’ which has over USD700m AUM and has been successfully lending for over ten years.
Prime Alternative Finance produces returns which are not correlated to bond or equity markets by lending to businesses and infrastructure projects across the UK’s rural economy. It also provides a vital source of commercial funding for these businesses and supports critical job creation at a time when commercial banks are withdrawing from the sector.
Craig Reeves, founder of Prestige Funds, commented: “Some investors are looking for a cash yield rather than an accumulation yield. We are seeing more and more interest in this strategy from investors globally as the private debt asset class matures and occupies a more important part of investor portfolios.”
Prestige has hosted a record number of more than 50 site visits this year to its Cambridge and London commercial lending operations, as well as the projects that it has backed around the country. These include several clean energy projects in the UK which generate power from on-farm waste.
“We are in an investment climate where most Eurozone government bonds are providing zero or even negative yield,” Reeves added. “It is not surprising that a wider range of investors are now actively involved in or seriously contemplating private debt as an asset class.”
Prime Alternative Finance has no performance fee and an annual management fee of 1.5%. It is a Luxembourg-domiciled SICAV CIF / AIFM.
The macro environment
With rising costs across almost all industrial and commercial sectors farming, food and agriculture often remains deeply inefficient while at the same time the UK wastes more food than any other country in Europe and has a rising population. There is an increasing demand to finance in productivity.
Over the last century, the global population has quadrupled. In 1915, there were 1.8 billion people in the world. Today, according to the most recent estimate by the UN, there are 7.3 billion people - and we may reach 9.7 billion by 2050. This growth, along with rising incomes in developing countries (which cause dietary changes such as eating more protein and meat) are driving up global food demand.
The UK imports approximately 50% of its food requirement while global food demand is expected to increase anywhere between 59-98% by 2050 according to the United Nations. Additionally, the UK wastes more food than any other country in Europe according to research published by the Daily Telegraph newspaper, while research from Bloomberg suggests that food staple prices have doubled since 2000.
This will shape agricultural markets in ways we have not seen before. Farmers worldwide will need to increase crop production, either by increasing the amount of agricultural land to grow crops or by enhancing productivity on existing agricultural lands through fertilisers and irrigation and adopting new methods like precision farming. With approximately 64 million people in the UK (of which approximately 8m were born overseas), and 5.7 million SMEs operating with the lowest unemployment in almost 45 years this represents a significant opportunity for investors.
Rising electricity prices in the UK and higher taxes on landfill are causing these businesses to turn to green energy projects as a source of on-farm energy, utilising existing waste. The UK will potentially have to source up to 20% of its gas supplies from renewable sources within ten years and entirely stop burning coal to generate electricity within 15 years. Additionally, the use of landfill is also expected to stop within 15 years. However, farming and food production is also the second largest producer of C02 after energy production.
The macro environment - our investors
Negative interest rates/low bond yields have created many “richly priced” equity markets.
Although these remain interesting times for both financial markets and financial advisors, Prestige operates several interesting non-market based, alternative investment opportunities that continue to produce positive results with a low correlation to traditional fixed income and equity based markets.
The nature of our direct lending businesses is specialist; Prestige Funds are niche, experienced investor strategies that can sit at the periphery of any portfolio. However, since there remains a significant number of sovereign and corporate bond yields and interest rates operating with near zero throughout Europe and elsewhere while at the same time many equity markets look “richly priced”, there is perhaps now more than at any time in recent history a requirement to provide investors with a genuine alternative inflation hedge in an increasingly uncertain and volatile world.
Alternative lending & private debt has become a genuine asset class
As interest rates have risen in the USA and elsewhere there is increasing pressure on bond prices as well as rising volatility in many equity markets. Investor interest in the direct lending / private debt space continues to increase especially since access to credit from traditional lenders for many small businesses has yet to recover to pre-2008 financial crisis levels. We are seeing an increasing number of Independent Asset Managers, Family Offices and Pension Funds allocating to this area.
Prime Alternative Finance
Summary of Terms
FUND: European Finance Opportunities S.C.A
Sub Fund: Prime Alternative Finance Fund
SCHEME REGULATORY TYPE: Alternative Investment Fund Manager (AIFM)
INVESTMENT STRATEGY: UK / Asset Based - Direct Lending
INVESTMENT MANAGER: Prestige Capital Management Limited
& MARKETING SUPPORT: Prestige Asset Management Limited
FUND DISTRIBUTOR: OpenFunds Investment Services AG
FUND ADMINISTRATOR: Mitsubishi UFJ Investor Services & Banking (Luxembourg)
FUND CUSTODIAN & BANK: Mitsubishi UFJ Investor Services & Banking (Luxembourg)
FUND AUDITOR: KPMG Luxembourg
SHARE CLASSES: Participating Shares (Accumulation & Distribution)
Institutional Shares (Accumulation & Distribution)
CURRENCIES: GBP / USD / EUR / CHF / SEK
MINIMUM SUBSCRIPTION: EUR 125,000 (or currency equivalent)