With global trade facing renewed uncertainty and a possible shift towards protectionism, middle powers like Australia will play a pivotal role in a reshaped global landscape.
Ports, as critical infrastructure, are central to this – supporting diversified trade routes and underpinning domestic GDP. With two port investments in the Merricks Capital Partners Fund, one operational and one under construction, we expect the Fund to increase its exposure to this asset class from 1% to approximately 8% over the next 12 months.
Our key insights into port investments from a private credit lens:
- Economic significance: Australia’s ports handle AU$650 billion in trade annually, contributing AU$264 billion to the gross state product and supporting around 700,000 jobs, or one in every 20 jobs across the country. Over the past five years, AU$3.8 billion has been invested in port infrastructure, growing at a 7.4% CAGR, highlighting the sector’s critical role in driving economic stability and growth. (Ports Australia)
- Capital scarcity: We target small to mid-market infrastructure and industrial assets ($30m-$300m) with shorter development timelines and clear market demand. Record capital flows into infrastructure CAPEX, totalling over $125bn for non-mining and $52bn for mining projects (ABS 2023), bolstering the opportunities for private credit to take secure senior positions in the capital stack while banks are more hamstrung with levered balance sheets and tighter capital provisioning.
- High barriers to entry: The complexity of port financing and operations limits competition. This creates opportunities for experienced capital allocators to generate compelling, inflation-hedged returns in a market with a growing demand for modernisation and expansion. We believe that the Fund’s operational port investment, T-Ports, located at Lucky Bay, South Australia was the first new port in the state for more than two decades, illustrating the challenges in establishing new supply capacity even when demand is persistent.
- Critical infrastructure in an uncertain world: Ports underpin diversified supply chains, reducing dependence on any single trading partner and providing resilience amid geopolitical tensions, including shifts in China’s trade strategy and potential US tariffs.
We are currently reviewing $1.1bn of specialised infrastructure and industrial projects including ports, energy, agricultural processing and mining processing investments.
