Grant Atchison
It’s a challenging time for investors seeking regular income streams with some capital stability, given the combination of interest rates pushed down further, and the earnings outlook on some companies still unclear.
“In search for alternative solutions, institutional investors and family offices have been increasing their capital allocation to secured private debt, but so far wealth advisory groups have had limited access to this sector,” notes Omar Khan, Alceon Group Director and Head of Wholesale Capital.
“To fill this gap, we are very pleased to launch the Alceon Debt Income Fund, a retail fund that aims to deliver regular monthly income from a diversified and conservative portfolio of debt secured by real estate.
“With the backing of Alceon’s extensive resources, we will seek to maintain a strong total return target of 5 – 7% a year.
“The portfolio of underlying loans in the Fund is primarily secured by registered first ranking mortgages held over Australian property, mostly on the east coast of Australia. The loans finance a mix of real estate development, construction and ownership.”
The fund features attractive risk adjusted returns combined with a conservative weighted average LVR and short weighted average duration.
“We believe it’s a compelling offer which provides investors and advisors a unique mix of features,” Mr Khan said.
“We follow a bottom-up process, conducting fundamental analysis and due diligence on potential opportunities with an active program to monitor the progress of projects, assets and delivery partners. The Fund invests in secured senior and second ranking loans where the loan-to-valuation ratio does not exceed 65%.”
The Fund, previously called the Freehold Debt Income Fund, returned 8.3 per cent (net of fees) over the 12 months to 30 June 2021 and has produced an annualised return of 8.5 per cent since inception in October 2019.
Mr Khan adds: “Since 2016, when APRA introduced lending controls, non-bank market share in Australia has increased from 4% to circa 8% – still well below global standards where non-banks command a 20% – 30% market share.”
“The growth, which continues today, can be attributed to a simple supply-demand equation where banks continue to reduce exposure to residential development lending. The reduced exposure is primarily driven by banks increasing the conditions that developers need to meet to obtain finance. The exhaustive and slow bank process can result in delays for developers, and hence they increasingly seek alternatives.”
The Fund invests in loans issued by mid-market real estate owners and developers to finance real estate assets in Australia and some limited exposure to New Zealand.
Grant Atchison, Executive Director – Head of Real Estate Funds Management, adds: “The investment team acts as a partner, not just a financier, with long standing capabilities from developer to senior debt financier. Alignment with investors is important and Alceon co-invests in every investment, having a significant stake in each investment.”
The fund is now available on Netwealth and HUB24 with plans to provide broad platform access to wealth groups across Australia.
The minimum investment is $10,000.
