Healthcare and life sciences is emerging as an economically resilient alternative asset class, given that the industry has huge tailwinds in the form of the demographic force of an ageing population around the world. Plus, there is the growing demand from lifestyle diseases – illnesses that arise from day-to-day life habits of an individual – and the expansion on the back of digital health and AI.
To paraphrase one of Paul Keating’s more memorable lines, if you walk into any pet shop in Australia, the resident galah will be talking about the under-supply of housing. But what’s not being discussed is the real supply issue behind it: access to flexible capital for developers and builders.
Alceon ascends SQM Research’s private debt ladder with property income fund
Multi-strategy alternative investment manager Alceon has been awarded a rare 4.25 stars – equivalent to a ‘Superior / High Investment Grade’ rating – for its Debt Income Fund, furthering the financier and multi-strategy investment team’s ambitions to lead the private debt space in Australia.
The ratings uplift for the fund, which primarily lends to mid-market real estate companies that home in on the burgeoning residential side of the market, was previously awarded a 4 star rating back in 2022. In that year the fund doubled in size – a feat it almost matched again recently, growing from $106 million in May 2023 to $193 million in May 2024.
The fund has latched onto what is the hottest asset class in the last five years, with private debt surging in popularity amongst companies looking to borrow capital but unable to fit the increasingly narrow lending profile chute of the major banks. Moreover, many borrowers are also turning to private credit providers like Alceon because the loans have a significantly more flexible structure, typically because they be more agile in setting terms.
Alceon now has a private debt portfolio of real estate assets that totals around $2.8 billion across several investment vehicles including open-ended funds, close-end syndicates and institutional managed account models (SMAs). That growth has come via $7.9 billion in (senior debt) real estate loans across 288 individual transactions in Australia and across the Tasman. The debt fund itself has 57 loan facilities, 43 separate borrowers and an average LVR of 62 per cent.
According to SQM Research – one of the country’s leading property and investment research outfits – the fund’s ratings uplift is a reflection of its “substantial potential” to outperform in the medium-to-long term, which should put it towards the front of the queue for any approved product list.
“The investment/lending process is thorough and robust,” SQM states. “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.”
“The fund is fully allocated to senior debt (first mortgages) and at relatively low/modest LVRs (maximum allowed is 65 per cent), 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,” the SQM team adds.
Alceon head of funds management Grant Atchison (pictured) reports that the fund has a net return of 8.66 per cent per year, with its position on senior loans giving investors comfort that robust, stable returns should be continue.
“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,” Atchison said.
“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.”
