This year will be 10 years of the first issuance of the private Investment vehicle (CKD) listed on the Mexican stock exchange. The CKD in Mexico have allowed the Afores to venture into the financing of various infrastructure projects, energy, real estate, mezzanine debt, as well as prívate equity.
The four CKDs that were born in 2009 are: RCO of Red de Carreteras de Occidente (infrastructure sector, ticker RCOCB_09 and with a current market value of 959 million dollars), Wamex (private equity, MIFMXCK_09 and with a current market value of 64 million dollars), Macquire (infrastructure, FIMMCK_09 and with a current market value of 303 million dollars) and Discovery Atlas (private equity, DAIVCK_16 and with a current market value of 66 million dollars), however, only Macquiere was issued at 10 years. that all others have a term between 20 and 29 years.
Among the eight CKDs that were born in 2010, only six will expire next year (2020), which will begin to close the first cycles of CKDs with net returns and that will be an important promotion mechanism. The history of the CKDs was carried out in 2008 with the issuance of the instrument structured by Santa Genoveva (primary sector, AGSACB_08 and with a current market value of $ 135 million dollars) issued at 20 years.
The CKD issued by Capital I Reserve (CI3CK_11 of real estate and a market value of 55 md) in 2011 is also close to expire.
The CKDs that came out between 2009 and 2012 (20 in total including Santa Genoveva) came out with the prefunded modality. The first CKD with capital calls was Northgate (AGCCK_12) in the private equity and fund of funds segment, which set the tone for starting issues with capital calls. It should be noted that the structure of capital calls with punitive dilution has been the most used methodology among subsequent CKDs.
Today there is a total of 129 CKDs with a market value of 12,644 million dollars and the capital commitments amount to 22,170 million dollars according to information prepared with data from the Mexican Stock Exchange and the issuers as of March 21.
The CKDs participate in 7 sectors, where three stand out in number of funds, market value and capital committed: real estate, infrastructure and private equity. The capital committed are greater than 4,000 million dollars in each of these sectors. The CKDs that are fund of funds, energy and credit (mezzanine debt), the capital committed amounts are between 2,000 and 3,000 million dollars. The primary sector being the smallest amount (294 million dollars).
Between 2016 and 2017 the offer of CKDs increased by 15 per year respectively and by 2018 the number increased 150% to place a total of 38 CKDs. Of these, 18 came under the format of International and Private Investment Vehicles (CERPIs). This significant change in number and amount placed was due to the change in regulation where the CONSAR allowed the Afores to invest up to 90% of the resources internationally and at least 10% in Mexico. Several of these issues are tailored suits to some Afores.
In terms of capital committed, 2018 was the year with the most committed resources (6,869 of 22,170 million dollars in total). In the first three months of 2019 there have been three new CKDs including two CERPIs (one more from Blackstone to complete 4 and the first from Spruceview Mexico) and one CKD (ACON).
Of the total 129 CKDs, 29 issuers can be identified that have jointly issued a total of 86 CKDs (almost three CKDs per issuer on average), so that 43 issuers have only one CKD in the market so far.
The 5 most important issuers in capital committed amount are:
- Infraestructura Mexico with 4 CKDs (the tickers are: EXICK_14, EXICK_16-2, EXI2CK_17, EXICPI_18). Mexico Infrastructure Partners is an investment company specialized in investments in infrastructure and energy. It has capital calls of 288 million dollars and has capital commitments of 1,438 million dollars.
- Credit Suisse with 3 credit CKDs, that is, mezzanine debt (CSCK_12, CS2CK_15, CSMRTCK_17). It has capital calls of 479 million dollars and has capital commitments for 1,250 million dollars.
- Walton Streel Capital with 3 real estate CKDs (WSMXCK_13, WSMX2CK_16, WSMX2CK_18). It has capital calls of 212 million dollars and has capital commitments for 1,061 million dollars. In 2015 Walton also issued a CKD together with Finsa (FINWSCK_15) that has a market value of 243 million dollars.
- Artha Capital with 7 real estate CKDs (ARTHACK_10, ARTCK_13, ARTCK_13-2, ARTH4CK_15, ARTH4CK_15-2, ARTH5CK_17, ARTH4CK_18). It has capital calls of 321 million dollars and has capital commitments for 974 million dollars.
- BlackRock with 4 CKDs of which two of them are in CERPI format. The 4 CKDs participate in the energy sector, infraestructure and also have fund of funds (ICUADCK_10, ICUA2CK_14, BLKCPI_18, BLKAGPI_18D). It has capital calls of 298 million dollars and capital commitments for 921 million dollars
There is an initiative to allow private placement that, if authorized, would be highly likely to require secondary laws, which would take time to implement if applicable. This initiative is aimed to reducing issuer costs.
In what happens if it occurs, the maturities of the CKDs will start to have results that some will be good and another one not, given the nature of this type of investments where the important thing is diversification.
Column by Arturo Hanono
Arturo Hanono is an institutional asset manager in Mexico. He has more than 30 year's experience in the Asset Management world, of which 15 he spent as a private banker and in the last 18 years has been CIO in several Afores. He has a degree in Economics from Universidad Anáhuac (1983). For his professional thesis, he won first place in the National Stock Market Prize organized by the Mexican Stock Exchange in 1985.
You can find him at firstname.lastname@example.org