Institutional run on SNS's micro-credit fund
NETHERLANDS - Dutch bank SNS Reaal has decided to re-open its micro-credit investment fund because of unexpectedly high demand from institutional investors.
The fund, which provides micro-credits to projects and entrepreneurs in the developing world and is targeted at institutional investors, has already exceeded its original €100m target fundraising by one quarter.
A dozen major Dutch pension funds are, at present, invested in the fund, including the Stichting Spoorwegpensioenfonds (Railway Pension Fund, SPF) and Stichting Pensioenfonds voor de Grafische Bedrijven (Pension Fund for the Printing Industry).
SPF selected the investment as part of its socially responsible investment portfolio reviewed last year and, in addition to its investment in the SNS Micro-Finance Fund investment, SPF has been working with the Dutch Royal Tropical Institute (KIT) on poverty reduction projects.
SPF spokesman Tjitte Faber told IPE the fund believes it is very important micro-financing supports the eradication of poverty. At the same time, the Micro-Finance Fund is also expected to generate an interesting yield which fits within the overall pension fund risk profile.
Faber stated SPF has chosen for the SNS Micro-Finance Fund because it not only accepts third-party investments but will also receive investment inflows of its parent company, all of which will be provided as loans for micro-financing projects.
"The fund's oversubscription is proof of the fact that institutional investors are searching for good investment opportunities that contribute to social development," commented Theo Brouwers, director of SNS Asset Management and responsible for developing and launching the fund.
"The fast growing institutional market for microfinance demonstrates that professional asset management and social objectives are certainly not mutually exclusive. On the contrary, we would say," he added.
Total investment volume of the new fund will be provided to so-called micro-financing institutions in the developing world, which provide low interest loans to private entrepreneurs or social projects, largely in Africa and Asia. At present, less than 3.5% of total micro-finance loans are not being repaid so SNS will use its extensive network of trade unions and other social partners worldwide to help develop the micro-financing concept.
The fund's strategy is actually to invest 70% of its assets in bonds, while just 30% of capital is placed as equity in different micro-financing institutions. At the same time, however, around 50% of the total investments will be done in local currencies as this is seen as a major instrument to assisting the local economies and financial development.
SNS Asset Management currently holds assets of €16.4bn. DWM Asset Management LLC, which is a part of the Developing World Markets Group, has been appointed as the investment manager of the micro-credit investment fund (Microfinancieringsfonds) which remains open until October 1 2007.