2012 Symbiotics MIV Survey

Transcription

1 Market Data & Peer Group Analysis July 2012

2 Table of Contents 1. Survey Overview 1.1 Description Survey Results at a Glance 5 2. MIV Market 2.1 Total Assets Growth Number of Funds Market Concentration Assets Composition Financial Instrument Direct Debt Investments Regional Distribution and Growth Rates ESG Information: Social Outreach ESG Information: MFIs Product Range MIV Peer Group Analysis 3.1 Segmentation Total Assets Growth Total Assets Composition Portfolio Growth Geographical Allocation (Volume) Geographical Allocation (Investees) Risk Concentration Funding Sources Total Expense Ratio Financial Performance Fixed Income Funds Performance Key ESG Practices Annex 4.1 Participating MIVs and Peer Group Composition Online Benchmarks 31 2

3 1. Survey Overview

4 1.1 Survey Overview Description About the Survey The 2012 Symbiotics MIV Survey aims at providing comprehensive market trends and peer group analysis to practitioners and funds managers with a way to benchmark themselves and improve their financial and social efficiency. The Survey is based on December 2011 information reported by MIVs. The CGAP MIV Disclosure Guidelines are used as the reporting standard. The survey offers two levels of analysis: 1) Key market trends and figures; and 2) Benchmarks and peer group analysis. The survey focuses on two dimensions: 1) Financial performance, with a focus on growth, risk, return, efficiency and funding patterns; and Microfinance Investment Vehicle Definition Microfinance Investment Vehicles (MIVs) are independent investment entities with more than 50% of their non-cash assets invested in microfinance and which are open to more that one investor. They include: Fixed Income Funds: Investment funds and vehicles of which the core activity, defined as more than 85% of their total non-cash assets, is to invest in debt instruments. Mixed Funds: Investment funds and vehicles that invest in both debt and equity, more than 15% and less than 65% of their total non-cash assets invested in equity investments. Equity Funds: Investment funds and vehicles of which the core activity, defined as more than 65% of their total non-cash assets, is to invest in equity instruments. 2) Social performance, with a focus on commitment to ESG practice and reporting. 4

5 1.2 Survey Overview Survey Results at a Glance Survey Coverage Out of the 99 MIVs identified, 72 responded to the survey. These 72 MIVs had total assets under management of USD 6.8 billion as of 31st December They represent 90% of the MIV market asset base, currently estimated at USD 7.5 billion. Out of the participating MIVs: 42 are Fixed Income Funds, 15 are Mixed Funds and 15 are Equity Funds. MIV Market MIV assets recorded a year-over-year growth rate of about 15%. The average MIV portfolio amounts to USD 71 million, with 83% of assets in direct debt investments. More than 70% of the total microfinance portfolio was still invested in mature microfinance markets, like Latin America and Eastern Europe & Central Asia. The average yield on direct debt portfolio declined from 8% in 2010 to 6.6% in Peer Group Analysis In terms of volume, Fixed Income Funds accounted for 80% of the total assets under management. 28% of the direct debt investments made by Fixed Income Funds were made in local currency, of which 4.4% were unhedged. Mixed Funds had average portfolios of about USD 45 million, with almost 29% invested in equity. Mixed Funds showed an increase in financial leverage with a total liabilities over total equity ratio of 27.9% (vs. 18% in 2010). Equity Funds recorded a positive growth rate (+14%); yet below the 126% growth rate forecasted one year ago. Equity Funds also increased their cost efficiency, with the total expense ratio decreasing from above 6% to less than 4% in MIV managers forecasted a 19% asset growth for 2012, and the majority expects an increased financial performance. On average an MIV reached out to about clients, with a loan size of about USD

6 2. MIV Market

7 2.1 MIV Market Total Assets Growth MIVs recorded a positive, yet low, asset growth rate for the second consecutive year. Total assets grew by 15% in 2011, which is above the 10% growth rate of 2010, but still below pre-crisis levels. Fund managers remain rather conservative on their growth projections, targeting a 19% increase of their asset size by the end of MIV Total Asset Growth 86% n/a 34% n/a 25% 29% 10% 17% 15% 21% 19% Effective Growth Rate Forecasted Growth Rate Throughout the presentation, historical data refers to previous CGAP and Symbiotics MIV Surveys. 7

8 2.2 MIV Market Number of Funds In 2011, 7 new Microfinance Investment Vehicles opened, while 9 closed, reducing to 99 the estimated number of active MIVs. The 7 new funds were launched by established microfinance fund managers and, despite debt is still the main investment instrument, they show an increasing interest in expanding equity investments and opening new markets. 3 out of the 7 new funds focus the entire portfolio on the African market. MIV Inception and Targeted Closing Date New Fund Opened Closed Funds Funds Expected to Close 8

9 2.3 MIV Market Market Concentration The MIV market segmentation remains mostly unchanged: highly concentrated with the top 10 MIVs representing over half of the total asset size and the invested portfolio. In terms of total asset size, only Fixed Income and Mixed Funds feature among the top 10 MIVs and all, but one U.S. fund, are based in Europe MIV Market Concentration Microfinance Investment Vehicles (MIVs) Total Assets (USDm) % of all MIVs Microfinance Portfolio (USDm) % of all MIVs All Participating MIVs % % Top Five % % Top Ten % % Top Twenty % % Top Fifty % % 9

10 2.4 MIV Market Assets Composition The MIV asset structured remained concentrated on the core microfinance investment activities. MIVs report average total assets of USD 95 million and an average portfolio of USD 71 million. In 60% of the cases, the liquidity levels stabilized below the 15% threshold. On average, MIVs had USD 31 million in undrawn commitment at the end of 2011, a 10% increase compared to MIV Assets Composition 4% 4% 4% 16% 10% 13% 14% 10% 8% 70% 73% 75% Microfinance Portfolio Other Portfolio (SME, Fair Trade, Market Instruments) Liquidities Other Assets 10

11 2.5 MIV Market Financial Instruments MIVs are still predominantly invested in fixed income instruments; direct and indirect investments represent combined more than 85% of the total invested portfolio. Only few MIVs provide guarantees, which, in the past two years, remained stable at 0.1% of the total portfolio. The indirect portfolio decreased to 6% in 2011, from 8% of the total microfinance portfolio in Financial Instruments, % of Microfinance Portfolio Instruments Growth 2010/ % 3.3% 11.2% Total Direct Portfolio 19% 0.1% Direct Debt 20% Direct Equity 12% Total Indirect Portfolio -6% 82.8% Indirect Debt -9% Indirect Equity -4% Direct Debt Direct Guarantees Direct Equity Indirect Debt Indirect Equity Growth rate calculated on a constant sample of 59 MIVs for the year 2010/

12 2.6 MIV Market Direct Debt Investments The key characteristics of direct debt investment - the average investment size, maturity, hedged local currency and provisions - remained mostly unchanged. On the other hand, the share of unhedged local currency doubled in just one year from 2.5% in 2010 to 5% in Due to local market liquidity, increased local funding and savings, yields on debt investments decreased from 8% to 6.6% by the end of Microfinance Debt Characteristics Historical Average Yield on Direct Microfinance Debt Portfolio 2011 Average Debt Investment Size USD 1.8 million Average Number of Investees 37 Average Remaining Maturity 23 months Share of Local Currency 28.9% Of Which Unhedged 5.0% Outstanding Loan Loss Provisions 2.9% Loans Written-off During % 7.9% 8.0% 6.6%

13 2.7 MIV Market Regional Distribution and Growth Rates Despite coming from a rather low base in absolute terms, for the second consecutive year the portfolio in Sub-Saharan Africa has been the fastest growing (+54% in 2010 and + 41% in 2011). On the other hand, the portfolio in South Asia and the Middle East & North Africa contracted, due respectively to the slow recovery of the Indian market and the effects of the Arab Spring on foreign investments. MIV Portfolio Regional Breakdown Regional Growth Rate 2010/2011 2% 7% Sub-Saharan Africa 41% 8% Eastern Europe & Central Asia 14% 9% 41% Latin America & the Caribbean 9% East Asia & Pacific 7% Middle East & North Africa -6% 33% Eastern Europe & Central Asia East Asia & Pacific Middle East and North Africa Latin America & Caribbean South Asia Sub-Saharan Africa South Asia -10% Regional growth rates are calculated on a constant sample of 52 MIVs for the year 2010/

14 2.8 MIV Market ESG Information: Social Outreach Fund managers are increasingly focused on ESG objectives and are improving their reporting: more than half of the participating MIVs reported on outreach indicators, key characteristics of end clients and the range of financial services offered by MFIs. Fund managers are also increasing their commitment to industry initiatives; indeed 96% of the participating MIVs endorsed the Client Protection Principles. MIVs Outreach End Client Indicators Gender 1'797 Men; 36% 1'553 1'631 Women; 64% Location 84' ' '892 Urban; 47% Rural; 48% Average Number of Active Borrowers Financed Average Loan Size of MFIs to Active Borrowers (in USD) Semi-Urban; 5% 14

15 2.9 MIV Market ESG Information: MFIs Product Range The data reported by MIVs on their partner institutions shows that the majority of MFIs offers a fairly diversified range of products, including insurance products and other financial services, but microenterprise loans still represents 68% of the total portfolio. For the first time MFIs have, on average, a higher number of voluntary savers than borrowers among their clients. Voluntary Savers MFI Product Range Loan Portfolio (% Total Portfolio) Other Loans; 21% Consumer Loans; 12% Microenterprise Loans; 68% Other Financial Services (% MFIs) 83% 80% 116% % 42% 40% 42% Voluntary Savers as a % of Active Borrowers Non Financial Services Other Financial Services Insurance Savings 15

16 3. Peer Group Analysis

17 3.1 Peer Group Segmentation Fixed Income Funds are still the main type of MIV, accounting for 58% of the total participating MIVs, 80% of the total assets and 79% of the invested portfolio. Although in terms of number, both Mixed and Equity Funds represent 21% of the total participating MIVs, in terms of volume, Mixed Funds are almost twice as big as Equity Funds MIV Market Segmentation Number of MIVs % of all MIVs Total Assets (USDm) % of all MIVs Microfinance Portfolio (USDm) % of all MIVs All MIVs % % % Fixed Income Funds 42 58% % % Mixed Funds 15 21% % % Equity Funds 15 21% 486 7% 393 8% 17

18 3.2 Peer Group Total Assets Growth For the second consecutive year, all MIV peer groups had a slow positive growth, which is expected to continue in Equity Funds had a 14% growth in asset size, way below the 126% growth rate forecasted one year ago. Microfinance portfolios of Equity Funds had only a 3% growth in size (see slide 20), aligning the total asset growth to the other two peer groups. Average Total Assets Growth by Peer Groups 10% 15% 19% 6% 15% 15% 18% 19% 22% 58% 14% 51% All MIVs Fixed Income Funds Mixed Funds Equity Funds Forcasted 18

19 3.3 Peer Group Total Assets Composition Microfinance funds asset composition remained largely unchanged and focused on the core microfinance activities. The assets are composed on average of three quarters of microfinance activities more in the case of Equity Funds -, with the remaining split between other investments, including SMEs and Fair Trade, cash and other money market instruments. Total Asset Composition by Peer Group 4% 4% 3% 6% 14% 14% 18% 10% 8% 9% 1% 3% 75% 74% 79% 81% All MIVs Fixed Income Funds Mixed Funds Equity Funds Microfinance Portfolio Other Portfolio (SMEs and Fair Trade) Liquidities Other Assets 19

20 3.4 Peer Group Portfolio Growth Despite moving at a slower pace, the investment portfolio has continued double digit growth rate. For Fixed Income and Mixed Funds, the growth was mainly driven by an increase in microfinance activities. To the contrary, Equity Funds increased their exposure in SME and Fair Trade positions; nevertheless, these investments still represent a low portion of the total assets (3.1% by the end of 2011). Average Portfolio Growth by Peer Group (2010/2011) 19% 10% 17% 27% 18% 3% 89% -13% All MIVs Fixed Income Funds Mixed Funds Equity Funds Microfinance Portfolio Other Portfolio (SME and Fair Trade) Growth rates are calculated on a constant sample of 35 Fixed Income Funds, 11 Mixed Funds and 9 Equity Funds for the year

21 3.5 Peer Group Geographical Allocation (Volume) In terms of volume, traditional microfinance markets, like Latin America and Eastern Europe and Central Asia, still attract the majority of investments. These two regions represent more than 78% of the outstanding portfolio of Fixed Income Funds. In 2011, Mixed Funds presented the most diversified portfolio and the biggest share invested in underserved markets like Sub-Saharan Africa or East Asia & Pacific. Geographical Allocation (% Direct Microfinance Portfolio) All MIVs 41% 33% 9% 8% 2% 7% Fixed Income Funds 46% 32% 8% 5% 2% 6% Mixed Funds 26% 31% 17% 14% 1% 11% Equity Funds 10% Eastern Europe & Central Asia 45% 5% 37% 0% 3% Latin America & Caribbean East Asia & Pacific South Asia Middle East & North Africa Sub-Saharan Africa 21

22 3.6 Peer Group Geographical Allocation (Investees) When looking at the number of investees, the geographical concentration holds, but the regions may swap in their importance. Equity Funds, for instance, have 37% of the total portfolio in South Asia, while almost two thirds of the investees are located there. 46% of the portfolio of Fixed Income Funds is invested in Eastern Europe & Central Asia, but only 27% of the investees or 16 MFIs on average are based here. Geographical Allocation (% of Direct Investees) All MIVs 26% 40% 8% 10% 1% 15% Fixed Income Funds 27% 41% 8% 8% 1% 15% Mixed Funds 25% 38% 6% 11% 3% 17% Equity Funds 3% 20% n/a 62% 1% Eastern Europe & Central Asia Latin America & Caribbean East Asia & Pacific South Asia Middle East & North Africa 13% Sub-Saharan Africa 22

23 3.7 Peer Group Risk Concentration MIVs have typically concentrate portfolios: for all peer groups the top one region accounts for more than two thirds of the total portfolio and top five country exposure accounts for more than half. MIVs have on average 37 different investment positions, with a maximum of 51 investees for Fixed Income Funds and a minimum of 7 for Equity funds. Concentration Indicators (% Direct Microfinance Portfolio) 7% 59% 57% 32% 13% 60% 54% 26% 41% 60% 40% 13% 75% 94% 86% 83% All MIVs Fixed Income Funds Mixed Funds Equity Funds Top One Region Exposure Top Five Investment Exposure Top Five Country Exposure Top Five Unhedged Currency Exposure 23

24 3.8 Peer Group Funding Sources Different MIVs attract different type of investors. Yet, private institutional investors are the most important source of funding. Support from high net worth individuals doubled in Fixed Income Funds, representing less than 2% of the total funding in 2010 and more than 4% in 2011, while public funders slightly decreased their exposure. To the contrary, public funding slightly increased in Mixed and Equity Funds. Source of MIV Funding 5% 23% 25% 22% 21% 6% 4% 5% 46% 42% 62% 56% 25% 29% 10% 18% All MIVs Fixed Income Funds Mixed Funds Equity Funds Public Funders Private Institutional Investors High Net Worth Individuals Retail Investors 24

25 Total Expense Ratio 2012 Symbiotics MIV Survey 3.9 Peer Group Total Expense Ratio Fixed Income Funds report the lowest management fees and total expense ratio. However, the peer group includes passively managed vehicles (CDOs) that lower the average cost. When looking only at actively managed Fixed Income Funds, the management fees reach up to 1.6%. Equity Funds are still the most expensive ones, despite the increased cost efficiency (TER from over 6% in 2010 to less than 4% in 2011). Total Expense Ratios and Management Fees 0.6% 0.7% 1.0% 1.3% 1.9% 1.4% 2.6% 3.0% All MIVs Fixed Income Funds Mixed Funds Equity Funds Management Fees Other Expenses* * Other expenses refer to accounting fees, custodian fees, legal fees, marketing and distribution costs, and general administration. The sum of management fees and other expenses equals the Funds total expense. 25

26 3.10 Peer Group Financial Performance Overall 2011 returns, across all types and peer groups, were below the US Dollar and Euro performances reported in past years surveys. Returns on fixed income investments are mainly affected by the lower yield on the direct debt portfolio. In some cases loan loss provisioning and in others enhanced hedging costs can be the cause of these lower returns Financial Performance by Peer Group Coupon Payment Sample Size NAV Growth Per Share Sample Size Internal Rate of Return Sample Size Return on Equity Sample Size All MIVs USD 3.90% % % 4 -- EUR 3.30% % % 4 Fixed Income Funds USD 3.80% % EUR 2.90% % Mixed Funds USD % EUR 3.80% % % 3 Equity Funds USD % 2 -- EUR

27 3.11 Peer Group Fixed Income Funds Performance The performance of Fixed Income Funds decreased for US Dollar funds, while it remained stable for Euro Funds. Overall returns are below historical averages. Despite this downwards trend, Fixed Income Funds still provide a money market plus return: by the end of 2011, US Dollar returns were 226 basis point above the 1 month Libor and Euro returns 127 basis point above the 1 month Euribor. 8% Annual Returns (NAV Growth Per Share) 5.8% 6.3% 5.8% 5.9% 4% 3.9% 3.9% 3.1% 3.2% 3.2% 2.4% 2.4% 2.5% 0% Annual Return USD Benchmark (SMX - MIV Debt USD) Annual Return EUR Benchmark (SMX - MIV Debt EUR) The SMX MIV Debt are Symbiotics in-house indexes which track, on a monthly basis, the NAV of a selection of funds with a majority of assets invested in fixed-income instruments. The funds are equally weighted. The index is available on syminvest.com in USD, EUR and CHF since

28 3.12 Peer Group Key ESG Practices With the exception of a handful of MIVs, all fund managers have endorsed the Client Protection Principles. Almost all MIVs report ESG issues to investors and a big majority applies anti-corruption and/or internal whistleblowing policies to their investments. Environmental issues are also increasing in their importance, indeed 66% of the funds has integrated these issues in their investment decisions. Client Protection Principles Governance Transparency Reporting of ESG information to investors 86% 80% 88% 86% 81% 83% 96% Endorsement of the Client Protection Principles (%MIVs) Requirement of anti-corruption policies (% MIVs) 93% 87% All MIVs Fixed Income Funds Mixed Funds Equity Funds 80% 84% 28

29 4. Annex

30 4.1 Participating MIVs and Peer Group Composition Fixed Income Funds Mixed/Hybrid Funds Equity Funds Public Placement Fund ASN-Novib Fonds; Dexia Microcredit Fund; Dual Return Fund SICAV; DWM Microfinance Fund-J; ESPA VINIS Microfinance; IC Asia Women Microfinance Fund; responsability Global Microfinance Fund; responsability Microfinanz-Fonds; Wallberg Global Microfinance Fund Triodos Fair Share Fund; Triodos SICAV II - Triodos Microfinance Fund Private Placement Funds Dual Return Fund Vision Microfinance Local Currency; Emergency Liquidity Fund; EMF Microfinance Fund AGmvK; ETIMOS Fund Global MicroFinance Debt; European Fund for South East Europe; Finethic Microfinance SCA SICAR USD; Global Partnerships Microfinance Fund 2006 LLC; Global Partnerships Microfinance Fund 2008 LLC; Global Partnerhips Social Investment Fund 2010; KCD Mikrofinanzfonds (FIS) I "Global ; KCD Mikrofinanzfonds II "Latinamerika ; JAIDA; Luxembourg Microfinance and Development Fund; Microfinance Enhancement Facility SA; Microfinance Growth Fund; MicroVentures Financial Inclusion; MicroVest Short Duration Fund; MicroVest+Plus; Minlam Microfinance Fund; Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA); responsability SICAV (Lux) Financial Inclusion Fund; SNS Institutional Microfinance Fund; SNS Institutional Microfinance Fund II; The DWM Microfinance Fund Catalyst Microfinance Investors; CRESUD SPA; FEFISOL; FONIDI; Impulse Microfinance Investment Fund NV; Investisseur et Partenaire pour le Développement; NMI Frontier Fund; NMI Global Fund; responsability SICAV (Lux) Microfinance Leaders Fund; Rural Impulse Microfinance Fund; Rural Impulse Fund II Aavishkaar Goodwell India Microfinance Development Company; ACCION Investments in Microfinance SPC; Bellwether Microfinance Fund; BlueOrchard Private Equity Fund; Creation Investment Social Venture Fund I; DWM Microfinance Equity Fund I; Elevar Equity II LP; Goodwell West Africa Microfinance Development Company Ltd; India Financial Inclusion Fund; MicroVentures Equity 1; MicroVest II LP; Progression Eastern African Microfinance Equity Fund; Sarona Risk Capital Fund (MEDA); Sarona Risk Capital Fund I LP; Unitus Equity Fund LP Cooperative Companies/ NGOs Alterfin cvba; Capital for Communities Fund; Consorzio ETIMOS s.c; Fonds International de Garantie; MicroCredit Enterprises; Oikocredit Incofin cvso; International Solidarity For Development and Investment CDOs BlueOrchard Loans for Development 2007; Microfinance Loan Obligations (MFLO) Compartment Sub Debt; Microfinance Loan Obligations SA - Compartment Opportunity Eastern Europe

31 4.2 Online Benchmarks Additional information about the 2012 Symbiotics MIV Survey is avalable at Symbiotics Online Platform for Microfinance and Small Enterprise Impact Investments. 31

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