Barita going after more business in private credit market
Published:Wednesday | July 5, 2023 | 12:49 AM
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Barita Investments Limited is structuring a product, with loans as the underlying assets, as it deepens its involvement in the private credit market. Private credit involves loan-type arrangements outside of the banking system, including bonds and...
Barita Investments Limited is structuring a product, with loans as the underlying assets, as it deepens its involvement in the private credit market.
Private credit involves loan-type arrangements outside of the banking system, including bonds and convertible debt.
The segment currently accounts for four per cent of Barita’s net holdings, according to interim CEO Dane Brodber.
“In parallel, we are working to give investors exposure to this strategy as well with our private credit fund that we have in the pipeline,” Brodber said without going into greater detail.
He noted, however, that Barita’s enhanced capital structure, currently estimated at $36 billion, provides the company with capacity to offer credit to entities in a manner that most of its peers cannot.
“Our strength of capital, that is what enables our investment strategy. We have funding profit that’s overweight in capital relative to other broker-dealers in Jamaica. This gives us the ability to manage any idiosyncratic risk associated with the general effects of market volatility and provides a stable funding base for our investment strategy,” he said.
Barita has eight portfolio fund unit trust products, valued altogether at $19.4 billion in net assets up to March. The real estate unit trust holds the bulk of the funds, $8.5 billion, followed by a foreign exchange bond unit trust at $6.6 billion. The new private credit product will also be a unit trust-type arrangement.
The real estate unit trust reported an annual growth rate of 2,156 per cent as of May 2023, and generated returns of 55 per cent.
Barita explained that the rise was due to a large investment in MJR Real Estate, an affiliated entity of parent company Cornerstone Investments. MJR has poured billions into property acquisition, including Reggae Beach, 286 acres; Green Castle, 1,600 acres; Eden Gardens, two acres; the former Kingston ice factory, three acres; and Windsor Estates, 100 acres. The Barita unit trust benefited from the rise in the value of MJR investments.
“So the rise in the carrying value of the real estate would have driven the increase in the book value of the MJR shares and by extension the carrying value of the real estate portfolio. That was the ultimate source of the increase in value and would have been experienced by unit holders in the fund and that includes Barita Investments in our capacity as a significant unit holder of that fund,” Brodber said.
Going forward, the gains are expected to attenuate in the real estate fund due to a shift towards development of the lands rather than asset acquisition.
“Importantly, we do not expect those types of returns from the fund in the future, and going forward the fund will enjoy enhanced returns more from the opportunistic nature of our real estate holdings and the development phase of our real estate strategy,” the Barita chief executive said.