The Australian Business Securitisation Fund will receive its final funding tranche of A$500 million on July 1, taking the balance of its investment account to $2 billion. Little of it has been invested. The fund, which is administered by the Australian Office of Financial Management, has current commitments of $527.5 million, with investments in the warehouse facilities of Judo Bank, GetCapital (now Shift), OnDeck and Prospa, and notes issued by Prospa. These are the only investments it has made, with the first in Judo Bank in March 2020 and the most recent in Prospa’s PROSPArous 2022-1 issue in November last year. Banking Day contacted the AOFM and asked why only a third of the ABSF’s current funding has been invested in such a small number of investments since it was launched. An AOFM spokesperson replied: “The special account balance represents an upper limit on ABSF investments, not a target. The AOFM continues to receive proposals. Not all proposals are both within the ABSF’s mandate and consistent with the ABSF’s market development objectives. “For private warehouse transactions, the due diligence process can take several months.” The ABSF was established to improve lending market conditions for SMEs by facilitating the development of the securitisation market for SME lenders. The government committed $2 billion over four years to invest in securities issued by warehouses and special purpose vehicles established by small business lenders. The fund administrator, the AOFM, is required to prioritise investment in underdeveloped sectors of the SME securitisation market, assist the development of the market, encourage investment in SME securitisation by the private sector and promote competition in the SME lending sector. It was hoped that the injection of funds into the sector would help bring down the cost of SME finance. At the time it was set up, then-Treasurer Josh Frydenberg was sensitive to concerns from industry that the ABSF would crowd out other investors, and insisted that would not happen. A Treasury review of the ABSF last year said there was no evidence of crowding out. But perhaps concerns over this issue may have made the AOFM more cautious in its approach than it needed to be. One of the AOFM’s challenges has been helping develop a market for public securitisations backed by SME loans. Treasury said in its review said the comparability, consistency and availability of residential mortgage data is one reason for the strength of the Australian residential mortgage-backed securities market, but there was no equivalent reporting standard for SME loans. SME lending can be complex because there are different legal entities, sometimes in the one business, and there may be multiple collateral items for one loan. In addition, businesses may be structured for asset protection and tax planning. The AOFM has worked with the Australian Securitisation Forum to develop a reporting template for SME loans. ASF chief executive Chris Dalton said the template is currently being updated, with version 2 due for release next month. The new version clarifies some definitions and brings the template into line with overseas standards. Dalton said: “The long-term benefit of the ABSF may be the establishment