Alceon Group have launched a new Debt Fund to raise capital from investors seeking a higher return than regular investments.
The group is targeting wealth advisory groups whose clients are in search of alternative solutions to deposits and share portfolios.
Omar Khan, Alceon Group Director and Head of Wholesale Capital said, “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.
Alceon is a financier and multi-strategy alternative investment manager established in 2010, with funds under management of approximately $3 billion across asset classes including real estate, private equity and listed equities. The firm has been an active participant in the Australian private credit market having deployed over $2.5 billion in over a 100 senior debt deals since 2016 with end project values of more than $8 billion.
“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” said Mr Khan.
“With the backing of Alceon’s extensive resources, we will seek to maintain a strong total return target of 5 – 7% a year. 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.”