360 Capital Pursue Small Listed REIT

16 July 2020

360 Capital Group are moving to broaden their platform and have acquired an 18.5% stake in the listed Australian Enhanced Income Fund (ASX:AYF).


The Australian Enhanced Income Fund is a listed managed hybrid fund managed by Elstree Investment Management with a market cap of around $18m. The Fund invests in a diversified portfolio of up to 35 ASX listed debt equity hybrid securities.


Elstree believe that the hybrid debt securities market is inefficient due to a combination of complex security structures, a high degree of retail investor input, limited institutional involvement and lack of quality research. Elstree seek to exploit those inefficiencies through a combination of strategic security selection and active secondary market trading.


The fund has had a 3 year total return of 4.5%pa to 30th June, however there is limited liquidity for the units with an average of 2.5% trading hands each month.


360 Capital invested approximately $3.3m for their 18.5% interest and have advised that had have been in discussion with Elstree for some time and provided multiple proposals to the responsible entity of AYF, including changing the responsible entity to 360 Capital and providing a liquidity facility to those unitholders who wish to exit AYF (presumably at a discount to NTA)


In May 2020, 360 Capital Group launched an unlisted Credit Income Fund which invests in middle market private credit opportunities in Australia and New Zealand. No doubt, 360 Capital would see a listed fund as provide some further benefits to its stable of funds.