Newmarket Capital - Catalyzing Infrastructure Investment for Africa

Newmarket is a Philadelphia-based alternative asset manager investing in innovative real asset solutions at scale and specializing in the risk transfer market.  EnergyNet spoke with Shaz Langha, Vice President and speaker at PAS 25, about the company’s work in Africa, blended finance solutions, and the challenge of scaling development finance from 'billions to trillions’.

Tell us more about Newmarket and your work in Africa

Newmarket has catalyzed infrastructure investment and the deployment of capital to social and environmental projects by partnering with many of the world’s largest and most sophisticated banks and development finance institutions.

Significant Risk Transfer (“SRT”) or synthetic securitization is an emerging tool in the multilateral development bank (“MDB”) market with the potential to be a game-changer, uniting private sector investment and public sector partners to create jobs and deliver impact across the developing world.

By helping MDBs manage their balance sheets, SRT enables expanded lending capacity to support critical initiatives.

The first ever risk transfer transaction between a private investor and MDB is Newmarket’s 2018 Room2Run transaction with the African Development Bank (“AfDB”), which garnered widespread media attention and received multiple awards.

Newmarket continues to lead in thought leadership within credit risk transfer and impact investing, actively collaborating with a broad range of MDBs and sharing insights at industry forums and conferences.

For example, Newmarket and the African Development Bank organized a workshop for the international finance community to learn about the structure, challenges, and lessons learned from the Room2Run transaction at the International Monetary Fund and World Bank Annual Meetings in Bali.

Following the success of Room2Run, Newmarket executed a Letter of Intent with the AfDB at the 2024 Africa Investment Forum in Rabat, Morocco for a follow-up transaction which extends to include the Development Bank of South Africa as a key collaborator.  

 

How you catalyze investment and where do you invest?

Newmarket is positioned at the nexus of solutions, impact, and innovation.

Through our investment philosophy, we apply our structuring skills to areas of capital markets inefficiency, targeting segments where we can access large and diverse pools of quality credit risk as the building blocks of our portfolios.

We carefully evaluate industry trends, macro backdrops, and regulatory structures, all built on a foundation of robust bottom-up research and analytical credit analysis.

We are well known for our ability to identify certain systems-driven inefficiencies (e.g., regulatory capital optimization), around which we have successfully deployed large investments, generating attractive investment returns.

We continue to develop and extend this core approach, while also engaging natural extensions of our work to other areas of infrastructure investment, climate adaptation, and impact investment.

 

What are your thoughts on attracting the innovative and blended finance solutions that everyone is looking for?

Transparency and collaboration are key for crowding in private sector capital.

In Room2Run, we welcomed Africa50 to invest alongside us and they were able to lean on us from our SRT expertise.

Scaling4Impact, the first SRT to come out of Latin America and the Caribbean issued by IDB Invest in 2024, included two unfunded insurers, showing increased interest in this style of transaction.

Additionally, these trades provide an opportunity for the investor to educate their entire LP base on the strength of MDB balance sheets.

We believe that the private sector has a role to play in a wider range of risk return opportunities with MDBs and SRT is a good starting point for this.

This is supported by the release of the GEMs database, which provides visibility into creditworthiness and performance of an MDB.

 

What you see as the importance of this summit for Africa?    

MDBs have provided exceptional leadership and vital financing in support of international development.

These institutions have been particularly important players in emerging market infrastructure finance, in which needs far outpace private lending capacity and in which MDBs can provide terms and/or expertise that commercial banks sometimes cannot.

Going forward, spreading education and awareness is crucial for the development of Africa.

While the broadly syndicated loan and direct lending markets are critical to achieve Mission 300, synthetic securitizations can be a catalyst to unlock additional capital required to achieve this objective.

 

What conversations are you most looking forward to having at PAS, and what outcomes would you like to see?

Following the Room2Run trade in 2018, there was significant interest from the multilateral community to explore balance sheet optimization tools for capital relief.

 However, shortly after, the global pandemic put the brakes on internal deliberations. These institutions reprioritized their objectives and steered towards COVID-19 relief efforts rather than capital efficiency initiatives.

Six years later, the SRT market for MDBs and DFIs has reignited. In 2024, Banque Ouest Africaine de Développement and IDB Invest successfully issued their inaugural transactions.

Scaling development finance from “billions to trillions” will require leveraging this momentum as we progress into 2025 and beyond.  

 

Shaz Langha will be speaking in the session Financing Regional Transmission at PAS25.