HMC Capital Limited: Leading the Charge in Alternative Asset Management

About HMC Capital Limited

HMC Capital Limited (HMC, the Group, ASX: HMC) is a diversified, large-scale alternative asset manager that leverages its specialist capabilities to execute on complex transactions focused on high conviction trends within sectors incorporating healthcare, decarbonisation, digitisation and deglobalisation. The Group applies its balance sheet to seize high ROE opportunities aimed at growing Assets Under Management through asset warehousing, underwriting, and M & A activity. HMC has established unlisted funds, two listed REITs and newly developed funds focused on energy transition and digital infrastructure.

A rapidly expanding five-platform business

HMC Capital now has the foundations firmly in place to significantly scale up its existing $12.7 billion of Assets Under Management (AUM) Platform business to the Group’s stated $20 billion medium-term target.

The diversified alternative asset manager has added three new institutional scale, growth Platforms in FY24. These are platforms in Energy Transition, Private Credit, and Digital Infrastructure. The Platforms sit alongside the existing Real Estate Platform and Private Equity Platform.

The five Platforms are aligned to high conviction megatrends that include decarbonisation, digitalisation, an ageing population, and deglobalisation. The first three megatrends are well understood.

Deglobalisation refers to HMC’s core belief that there is a structural trend driving greater onshoring of key industries including infrastructure, pharmaceuticals, and food & energy security.  These structural trends have created a significant need to modernise and expand critical infrastructure, including housing, to support growing and ageing populations.  This will require record amounts of fundraising needed to support ongoing underinvestment by budget constrained governments.

To execute on the investment opportunities identified within these areas the Group has net liquid assets of $1.4 billion available at 30 June 2024. This is supplemented with investment dry powder of $2.5 billion across the five Investment Platforms.

Energy Transition Platform

The acquisition of a majority interest in Stor-Energy Pty Ltd for $50 million is the first seed investment of this Platform. Stor-Energy is a developer, owner and operator of large-scale battery energy storage systems across Australia’s National Electricity Market. The existing Stor-Energy management team will continue to lead the business and have retained a minority interest in the business.

The Platform is expected to achieve AUM of $2 billion in FY25 and management have stated that the Platform has the potential to grow beyond $10 billion of AUM over the next five years. Several potential bolt-on opportunities are currently under evaluation, including a second seed asset in due diligence ahead of a $2 billion fund launch in due course.

Stor-Energy’s development portfolio comprises 6 utility-scale battery energy storage systems which are located proximate to existing grid infrastructure across 4 mainland states.

Private Credit Platform

The acquisition of Commercial Real Estate credit manager Payton Capital for $127.5 million in cash and scrip in July 2024 has seen this Platform established with AUM of $1.6 billion. The assets are comprised predominantly of residential development loans.  Payton Capital is a highly profitable and scalable business focused on Commercial Real Estate lending.

A management team has been onboarded and AUM are tracking above budget since acquisition. Current monthly inflows are running at record levels. The Platform is expected to double in AUM in FY25. The medium-term strategy is to grow the Platform organically by expanding into Corporate and Asset-backed Private Credit. The Australian Private Credit market is expected to almost double over the next four years from $212 billion today to an estimated $346 billion by FY28.

Digital Infrastructure Platform

This Platform is likely to soon announce the purchase of various data centre assets currently owned by Global Switch Australia for about $2 billion. Due Diligence on these assets has been underway for several months.

Data Infrastructure is a highly specialised and rapidly growing and globally scalable sector that will become a major focus area for HMC. Other digital infrastructure assets required to meet the processing and storage requirements of new technologies include telco towers and fibre networks.

Looking Ahead

The Group is confident that it can maintain its 29 percent per annum average Total Shareholder Return since its IPO in October 2019.  High quality, long-term recurring revenue streams are sourced from a diversified pool of assets and businesses aligned with key investment themes that are likely to be played out for decades to come.

HMC has five scalable platforms exposed to sectors with attractive fundamentals and a proven management team who are highly incentivised to deliver superior risk-adjusted returns over the long-term.