Mark Spring

Pallas Capital, leading APAC specialist financier and investment manager in Commercial Real Estate (CRE) debt, has been awarded an inaugural ‘Superior’ four-star rating by SQM Research for its managed Pallas Senior Income Fund.

The high investment grade rating reflects the Fund’s potential for outperformance over the medium-to-long term and highlights the exceptional calibre of its management team. Since its inception in May 2024, the Fund has exceeded its net target investor return benchmark on average by 109 basis points.

Commenting on the achievement, Mark Spring, Executive Director at Pallas Capital, said: “The Pallas Senior Income Fund earning a four-star rating within three months of its launch is a significant accomplishment. It stands as a testament to our product, credit and operation teams. We adopted a disciplined approach to fund design, carefully seeding the Fund with a portfolio of performing assets specifically for the advised-client segment. This rating assures licensed financial advisers and their wholesale clients that it is managed by a top-tier team and is well-positioned for strong performance.”

The ‘Superior’ rating from SQM Research is the result of a rigorous analysis of critical review elements, including business platform and systems, executive management, corporate governance, risk management, portfolio construction and fund performance and design. The comprehensive evaluation underscores the Fund’s robust management practices and high-quality portfolio of diversified and seasoned CRE credit assets.

Launched in May of this year, the actively managed Pallas Senior Income Fund offers monthly liquidity and asset-backed income with significant downside protection. It comprises diversified and seasoned commercial real estate first mortgage assets across Australia and New Zealand.

The Fund exceeded its net target investor return benchmark of 5.00% margin over the RBA cash rate, by an impressive 163 basis points return for the month June, providing for a total net investor return (after fees and costs but pre-tax) of 10.71% p.a. The portfolio demonstrates diversification across geography, borrower profile, sector, investment form, loan type and tenor.

Pallas Capital offers tailored investment solutions through single asset and diversified fund opportunities, as well as separate managed account strategies, for wholesale and institutional investors. These solutions span the capital stack and cater to investor preferences for liquidity, yield, or a combination of both:

Single Asset Investments

• Australian & NZ Commercial Real Estate Finance structured as:
  • Joint Ventures (JV) & Preferred Equity
  • Registered First Mortgages (investment, specialized assets, land acquisition, pre-development, or construction)
  • Second Mortgages (registered and unregistered)

Diversified Portfolios

• Unlisted Portfolios of Australian & NZ real estate debt or equity products, offering varying degrees of liquidity and/or income

The firm’s credit underwriting is supported by rigorous due diligence on each borrower and the underlying property, realistic and multi-faceted exit strategies and active management by the team throughout the loan term.

Pallas Capital and development-manager Fortis comprise Pallas Group, a business that provides specialist investment, lending, and development solutions in the boutique property market in Australia.

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Mark Spring

Pallas Capital has earned a superior 4-star rating for the Pallas Short Term Fund from SQM Research. The rating qualifies the fund as High Investment Grade suitable for inclusion on most advisors Approved Product Lists.

SQM Research conducted thorough due diligence on Pallas Capital’s investment team and processes, corporate governance, fund compliance and risk management to determine the rating. A 4-star rating recognises the fund’s potential to outperform over the medium-to-long term, with an attractive return to investors after fees of 6% p.a.

The rating by SQM Research is a reflection of Pallas Capital’s commitment to the highest level of due diligence in its origination and loan management processes, providing investors with a reliable return, despite market volatility such as that seen in the past 18 months.

“The Pallas Short Term Fund was launched only at the start of this year, and an SQM rating of 4-stars is testament to Pallas Capital’s rigorous due diligence with its origination and credit processes and risk management systems,” says Mark Spring, Executive Director, Pallas Capital.

He adds, “This rating gives wealth planners and investors the assurance that an investment in the Pallas Short Term Fund is in safe hands, simultaneously offering brokers and borrowers the confidence that our discretionary pools of capital are well managed and that we’re here for them for the long term.”

Introduced at the start of 2022, the Pallas Short Term Fund offers investors a 6% p.a. yield payable monthly in arrears and is invested only in registered first mortgages secured over real estate assets across Sydney, Melbourne and Brisbane with each loan having a maximum LVR of 65%.

Importantly, these loans are required to have a maximum term to maturity of eight months, currently averaging at just three months. CRE loans in the later stages of maturity can present a lower risk profile as construction or planning approvals are either complete or in the final stages of delivery. Matching the loan maturity profile with the six-month notice period required for redemptions allows for investor redemption requests to be met with a high degree of confidence. The Pallas Short Term Fund provides investors with an additional interest payment if redemption is delayed for any reason.

Pallas Capital is one of the fastest growing structured property investment arrangers in Australia, offering brokers and developers lending solutions that are tailored to their needs. It offers borrowers five core loan types, being acquisition, pre-development, construction, residual stock and vacant land loans, along with the flexibility to negotiate LVRs and the required level of pre-sales for construction loans.

Pallas Capital manages funds for investing in commercial real estate loans secured against non-specialised property assets with values between $1 – $50 million in major metropolitan areas. Wholesale investors are offered investment opportunities providing fixed or variable rate returns ranging from 6% p.a. in the Pallas Short Term Fund to 7% to 8% p.a. (first mortgages), 11% for the High Yield Fund (First and Second Mortgages) and up to 15% p.a. for preference equity investments. Pallas Capital’s loans are supported by robust due diligence on each borrower and the associated property, a realistic and multi-faceted exit strategy, and active management of all loans by the Pallas Capital team throughout the term.

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SQM Research considered Pallas Capital’s investment team and processes, corporate governance, fund compliance and risk management to determine the rating. A 4-star rating recognises the fund’s potential to outperform over the medium-to-long term, with an attractive return to investors after fees of 7% p.a.

The rating by SQM Research is a reflection of Pallas Capital’s commitment to the highest level of due diligence in its origination and loan management processes, ​​providing investors with strong, secure and consistent yield, despite market volatility such as that seen in the past 18 months.
“An inaugural SQM rating of 4-stars is outstanding – it is testament to Pallas Capital’s rigorous due diligence with its origination process and continuous risk management systems,” says Mark Spring, Executive Director, Pallas Capital.

He adds, “This rating gives wealth planners and investors the assurance that their investment is in safe hands and will continue to provide strong risk adjusted returns. At the same time, it also gives brokers and borrowers the confidence that our discretionary pools of capital are well managed and that we’re here for them for the long term.”

Pallas Capital is one of the fastest growing structured property investment arrangers in Australia, offering wholesale and sophisticated investors investment opportunities backed by commercial real estate providing fixed rate returns from 5.5% p.a (short term investment in first mortgages) to 6.75% p.a. (‘life of loan’ first mortgages) to over 15% p.a. (preference equity).

The business provides funds for loans secured against non-specialised property assets – chiefly premium, city-fringe assets with values between $2 – $50 million in Sydney, Brisbane and Melbourne. Its loans are supported by detailed due diligence on the borrower, a realistic and multi-faceted exit strategy, and active management of all loans by the Pallas Capital team throughout the term.

Pallas Capital and developer Fortis form part of Pallas Group, a business that provides specialist investment, lending and development solutions in the boutique property market in Australia.

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The publication provides key information for advisers looking to offer SMAs as part of their advice proposition, including first-hand adviser testimonies and guidance from industry experts.

NAB Asset Management Head of Retail Sales, Jason Huddy said: “Our focus has always been on providing advisers with the right investment insights, solutions and support material to help them deliver successful outcomes for their clients and their businesses.

“We’ve been looking for ways to help advisers understand how to make the most of this growing SMA trend and the latest edition of Benchmark is an important step.”

NAB Asset Management’s SMA adviser education initiatives have included a number of national adviser roadshows, webinars, and the Benchmark website which allows advisers to access a range of resources and tools.

Head of New Product Development Mark Spring said: “While SMAs have been around for some time, many advisers don’t realise the difference they can make to their business.

“By providing them with a hands-on publication with what they really need to know, and a range of supporting resources, we’re looking to give advisers an edge in the competitive advice market place.”

NAB has been providing SMAs since 2009 and has over $1billion in funds under management for investors’ from 13 separate strategies across all domestic asset classes.

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