The Fund primarily lends to Australian mid-market real estate companies, focusing on financing real estate assets, particularly in residential markets. A smaller portion of the Fund’s loans are allocated to industrial, retail and other real estate sectors. Additionally, up to 20% of the Fund’s capital may be invested in New Zealand assets.

The Fund’s strategy is conservatively positioned, holding exposure to only senior first mortgages at relatively low loan-to-valuation ratios (LVRs), and supported by some of Australia’s leading financial advisers, wealth firms and family offices.

Superior – High Investment Grade Rating

SQM Research, one of Australia’s foremost investment research houses, awarded the Fund a 4.25-star rating, indicating its “substantial potential to outperform over the medium-to-long term” and making it a strong candidate for inclusion on most approved product lists (APLs).

SQM Research says “The investment/lending process is thorough and robust. Significant due diligence on investments is undertaken, with independent property and construction industry experts engaged along the investment pipeline. A series of monitoring protocols are in place to mitigate default risk.”

SQM further states “The Fund is fully allocated to senior debt (first mortgages) and at relatively low/modest LVRs (maximum allowed is 65%), which means that the Fund is lower risk than some other Funds that have a lower allocation to senior debt & asset-backed debt and at relatively higher LVRs.”

Consistent Return – 8.66% (annualised since inception in October 2019)^[1]

Alceon Head of Funds Management, Grant Atchison said: “The Alceon Debt Income Fund has enjoyed strong growth, growing from $106 million in May 2023 to $193 million in May 2024.”^[2]

Since establishment in October 2019, the Fund has a net return of 8.66%^[3] a year with a 3-year return volatility of 0.38%.^[4] The Fund is diversified across 57 loan facilities, 43 separate borrowers with 100 percent of the portfolio invested in first mortgages/ senior debt and a current weighted average LVR of 62 percent.^[6]

Atchison added, “Alceon focuses on originating well-secured senior debt positions with conservative LVR’s enabling us to provide our borrowers and development partners with greater speed, flexibility, and certainty compared to traditional real estate lending sources. This approach also allows us to capitalise on current market dynamics and the reduced presence of traditional banks, ultimately delivering higher returns to our investors.”

Alceon’s total real estate private debt portfolio comprises approximately $2.8 billion managed across a series of open-ended funds, close-end syndicates and institutional SMAs. Since inception Alceon has originated $7.9 billion in senior real estate loans across 288 individual transactions in Australia and NZ.

———

Notes:
[1] Past performance is not a reliable indicator of future performance
[2] Ibid
[3] Ibid
[4] Ibid
[5] As at 30 June 2024

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Grant Atchison

Alceon, a financier and multi-strategy alternative investment manager, has received a sought after 4.00-star rating from SQM Research for its retail private debt fund, the Alceon Debt Income Fund.

The fund holds a portfolio of loans 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 only invests in secured senior and second ranking loans with a maximum loan-to-valuation ratio (LVR) of 65 per cent.

Alceon Group is a leading non-bank financier with a loan portfolio of $2 billion at 30 June 2022. The Alceon Debt Income Fund which doubled in size over FY22 co-invests alongside Alceon’s High-Net-Worth, family office and institutional clients in the underlying loan portfolio.

Alceon launched the fund to allow advisers with retail clients to diversify their credit exposure with a conservatively positioned portfolio of private debt secured by real estate that paid monthly distributions and could be accessed via retail platforms.

The fund seeks to generate attractive yields of 5% – 7% p.a. and has generated and net return of 8.18% p.a. since inception to 31 July 2022.

Grant Atchison, Head of Real Estate Funds Management at Alceon said: “The Alceon Debt Income Fund differentiates from others in the segment by offering an institutional grade fund with a core focus on short duration, secured real estate debt.”

SQM Research notes: “The Alceon Group has more than a 10-year track record in the Real Estate/Investments industry and has about $4.3 billion in FUM and about 65 staff members. The Firm has a well-resourced and highly experienced investment team.”

“The investment/lending process is thorough and robust. Significant due diligence on investments is undertaken, with independent property and construction industry experts engaged along the investment pipeline. A series of monitoring protocols are in place to mitigate default risk.”

Atchison added: “Alceon and market commentators estimate that non-bank lending in the Australian residential real estate and construction market is between $20 billion and $50 billion. The fund allows advisers to access this growing institutional asset class that benefits investor portfolios with regular distributions and downside protection during volatile periods” .

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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.

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