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Bailey McCann, Opalesque New York: Providing debt to SMEs is proving to be a new and interesting opportunity for Hong Kong based managers according to delegates at the recent Opalesque Hong Kong Roundtable. Traditional means of financing aren’t offering Chinese SMEs senior debt, creating a vacuum that is being filled by local hedge funds.
There are approximately 50 million SMEs and only about 4 percent of them are getting the debt they need. Yet, they contribute to
65% of China’s GDP and created 80% of all employment within China and supply in excess of 50% of all tax income to
the central government.
Delegate Barry Lau, of Adamas Capital notes his firm chose SMEs to focus on because they are "good entrepreneurs are hungry and want to grow their business, and you can generate yields of around 18% (equity like return) yet sitting at the top of
the capital structure."
Once an SME is able to demonstrate steady and observable growth, they are included in the growing universe of opportunities considered by funds like Adamas, and Lau says, appeals to them because an entrepreneur is leading the effort.
"We are not
really interested in financing for a prolonged period of time, but for a year or two years’ bridge, the companies we are
looking at can absolutely afford to pay this type of a coupon. While typically we want all in at 20% per annum, we may
accept a lower cash coupon and ne...................... To view our full article Click here
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