IFC’s private loan platform attracts $7.1bn from insurers, Asian institutions

The growing investor appetite in private loans echoes in the IFC’s emerging market private loan program, sized over $7bn and backed by global insurers and Chinese and Hong Kong institutions.

International Finance Corporation (IFC), a member of the World Bank group, has raised $7.1 billion from eight global asset allocators, according to its latest report, Creating Impact: The Promise of Impact Investing.

IFC has raised the capital for its Managed Co-lending Portfolio Platform (MCPP), which aims to take advantage of the organisation’s origination capacity, according to the document, published on 8 April.

The lending platform’s eight investors include six private insurers: Allianz, AXA, Liberty Mutual Group, Munich Re, Prudential and Swiss Reinsurance Company. They together have committed $3.1 billion to the IFC’s platform as of the end of 2018.

Investors to this lending platform can establish an investment vehicle where IFC lends for its own account and the investors participate through B Loans, according to a statement from IFC.

Requests for comment to the six insurers were not returned. IFC did not respond to a request for further details on the investment period and target return level.

Two public bodies in Asia also backed the remaining $4 billion of the $7.1 billion. China’s central bank, the People’s Bank of China, pledged $3 billion to the IFC platform in 2013 – to be committed over a six-year period – via its State Administration of Foreign Exchange, which manages state foreign-exchange reserves in China. In 2017, Hong Kong’s currency board, the Hong Kong Monetary Authority, also funded the platform.

Both SAFE and HKMA invest through an IFC Trust Fund structure, which invests in senior loans across the financial services and infrastructure sectors, among others. Under this trust structure, IFC signs borrowers’ loan agreements for its own account and as implementer on behalf of the investor group.

Notably, within the MCPP program, there is a credit insurance facility provided by IFC called MCPP Financial Institutional Group (MCPP FIG), which is investing across 18 developing country banks. Of that, some 32 percent approved funds are mainly backing financial entities in South-East Asia and Central Asia according to another IFC statement.

The MCPP FIG began operating in 2017 through a partnership with Liberty Specialty Markets and Munich Re. It aimed to bring in $1 billion of unfunded credit risk exposure that will support $2 billion of IFC’s senior loans to developing country banks. Unfunded structures can be used to provide IFC with credit insurance or risk guarantees.

As of end-2018, MCPP FIG is also backed by the French insurance group AXA’s division, XL Catlin, and Swiss Re.

MCPP Infrastructure, another facility under the IFC’s MCPP program, targets $2 billion to deploy in emerging market infrastructure investments. It was launched In October 2016, with a capital commitment of $1.5 billion, according to PDI data.

The two facilities, MCPP FIG and MCPP Infrastructure, are allowing third-party investors to gain exposure to subsets of the IFC debt portfolio by providing credit insurance to IFC’s own account or through tranches of a syndicated loan.

IFC is the private-sector investment arm of the World Bank Group, established in 1956. IFC is the largest multilateral source of loan and equity financing for private sector projects in the developing world. It is primarily a direct investor, but its activities also include providing capital to private equity and venture capital funds that target these regions.