Thinktank bond trusts proving a positive for investors

From

Jonathan Street

Investors have been the beneficiaries of specialist commercial property lender Thinktank’s decision to establish two investment bond trusts as an alternative to bank financing as a capital source for its commercial lending.

On the one-year anniversary of the two funds, investors in the High Yield Trust have enjoyed returns ranging between an effective 8.48 per cent to 7.55 per cent, while in the more conservative Income Fund yields have ranged between an effective 5.58 per cent and 4.65 per cent as official interest rates have declined.

Both funds, which target the wholesale investment market with a focus on self-managed super fund (SMSF) trustees, have a minimum term of a year, minimum investment of $10,000 and pay monthly distributions.

To date, the Income Trust has experienced nil losses and has no loans it has originated in arrears, while the High Yield Trust also has had nil losses and only one loan in arrears.

The Income Trust loans are secured against first mortgages over commercial and residential property, while the High Yield Trust loans are secured against second mortgage commercial property subordinated to Thinktank’s wholesale funding facilities and term funding in bond markets.

Chief Executive Officer Jonathan Street says: “The two trusts’ performance has met all our expectations since their launch, and we expect them to enjoy strong growth in FUM.

“What these two trusts offer investors is diversification, as well as stable, secure, and competitive returns in a low-interest environment where investors are looking for yield without the volatility of the share market.

“Investors are also reassured by our track record in managing our loan book – it has been growing about 35% a year since 2013 – with our losses since opening the business in 2006 at less than 0.10%, well below the industry average and that of major banks.”

Street says interest in the funds has not been limited to the institutional market. “Although that was our initial thinking and where we focussed much of our attention, we are seeing small institutions, such as family offices and fund of funds, being attracted to the investment profile.

“Property is an asset that is well known and understood by the market, so we shouldn’t be surprised that mortgage-backed bond trusts offering such competitive yields are generating interest in the market, especially when our track record in managing credit risk is factored into the equation.”

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