It has been an exciting and busy 6 months for Funding Solutions. So busy, that we were unable to bring out a standalone Q1 update! Read on for a quick tour of our recent highlights together with some very exciting new developments coming soon.
Platform activity over the first half (H1) of 2021 is at a record high, with volumes up over 80% compared to the same period in 2020. The Addendum Platform also saw a record R3.3bn raised in H1 2021 from a diverse list of funders.
We continue to see a positive trend in the debt capital markets which were so negatively impacted by the Covid pandemic last year. This mirrors what we are seeing in the listed debt markets where slowly corporate issuance is on the rise, although still some way off pre-Covid levels. Interestingly, on the Platform, we are seeing a move towards shorter tenors which has provided good opportunities for short term money-market funds in particular.
Note: This represents listed issuance by corporates (ex-Banks) in the South African fixed income market.
Our corporate and funder clients remain loyal and continue to find value in our unlisted offering. Our focus remains on adding additional corporate names to the Platform to allow for further access to good quality corporate debt. With that in mind, we have a number of corporate issuers that we plan to bring to market in H2, thus allowing for greater diversification for funders.
The addition of the Marketplace function to the platform in late 2020 has already started to change the perception of our business in the market. Since adding this functionality, we have started to experience a shift where we are being seen as more of a technology/platform provider rather than just another pure debt arranger. We are becoming known as credible technology-centric problem solvers with our ear to the ground on industry matters and a willingness to work with other key players to address fixed income market challenges. We hope that the roll-out of an extended Marketplace offering will further entrench this perception.
We spent the last few months working with the market to fine-tune our new Marketplace product into an exciting new efficiency tool for transferring debt instruments.
Keep an eye out for our Marketplace product update that will be sent out separately and let us know if you would like to arrange a demo.
Did You Know
The Marketplace is not only for our existing buy-side users! The sell-side will also be joining to play a key role in enhancing liquidity and broadening the universe of instruments available on the Platform. This making it the first truly centralized fixed income bulletin board for all sides of the market on which users can meet, negotiate and engage.
There has been a dramatic increase in appetite from market participants for ESG linked instruments. Both corporates and funders continue to look for ways to enhance their proposition to capitalise on this ever-growing market. So far in 2021, we have already seen several corporates access the market with ESG bonds and this shift has also flowed over to the bank loan market in recent months with the issuance of sustainability linked loans.
If one looks at the trends in the developed markets where sustainability linked loans are becoming more common, we believe that incorporating necessary ESG elements into our debt agreements may become a standard feature. Sustainability linked loans incentivise the corporate’s commitment to sustainability through predetermined performance targets which, if met, could result in a discount in the debt instruments’ pricing. At Addendum we would hope to play a role in this market in the near future with our standardised debt agreements featuring ESG clauses and necessary KPIs.