Several new asset classes, including reverse mortgages, data centres and SME loans are emerging as a result of changing societal views and business pressures in the Australian economy. For these assets to become more investable, securitisation is a serious funding option.
This was one of the themes to emerge from a panel discussion at the Australian securitisation Forum conference in Sydney yesterday.
Atop the list is the possibility of securitising reverse mortgages, a possibility presented enthusiastically by Josh Funder, chief executive of Household Capital a specialist lender in this area.
"Australian retirees are the wealthiest in the world but most of this wealth is tied up in their homes," he said. Funder estimated that total wealth for this segment at $1.4 trillion.
"Australia has the world's best regulation on reverse mortgages, no problems were mentioned in the Royal Commission [into the banking sector], great healthcare and people are living longer than ever before," he said.
Funder contrasted this with the fixed rate, break fee reverse mortgages that are available in other parts of the world.
Funder said his aim is to get 1 per cent of the $1.4 trillion locked away in home equity into the real economy each year, which translates to $14 billion per year. If these reverse mortgages – essentially home loans averaging 20 per cent loan to value ratios – were securitised, most of the deal would be AAA rated.
Another asset class with the potential to become a large new asset class – at least in terms of the investment funds that would flow into it – is data centres.
Moody's estimated in a recent report that in the APAC region data capacity will more than double its current volume by 2029.
"The original estimate was that a further $560 billion in investments would be needed to meet this," suggested Tim Eastwood, head of global financing and credit trading in Australia for Deutsche Bank.
Should new data centres be rated along the lines of commercial mortgage-backed security deals, as they are in the US, or else how might such a project be funded – if securitisation was a viable option – was one question considered by this panel.
Eastwood said; "No one really knows how much funding will be needed – one data centre could take between $500 million and $1 billion to build.
"The need for data capacity and storage, with the predicted rise of artificial intelligence applications means the appeal is [very broad] not only for transfer of data but first of all for storage of data."
"A data centre typically has a high-grade tenant and is too big for private funding. There is also a need for so much more power for storage and cooling than just for transmission of data," said Will Tarrant,
"The question of power [generation] and data centre construction are being considered together it's only natural for such funding to go to the securitisation [market]," he said.