Alceon launches retail monthly income fund
Multi-strategy alternative investment manager Alceon is offering its unique debt-focused strategies to retail investors for the first time, with the launch of the Alceon Debt Income Fund.
Investors and advisers alike are confronted with a very difficult proposition, with the current low interest rate environment coinciding with the threat of higher inflation. This places pressure and muddies the outlook for traditional long-duration bond and similar strategies. Naturally, investors have ventured out beyond the traditional sectors in the pursuit of returns.
“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.
Alceon’s new fund seeks to solve this by making its expertise available to retail investors, targeting a total return of 5 to 7 per cent a year. This will be delivered via investment into a diversified pool of real estate-secured loans managed by the experienced internal team, paying a regular monthly income stream.
The fund will hold a portfolio of underlying loans primarily secured by registered, first-ranking, mortgages held over Australian property, mostly on the east coast of Australia. It also invests in loans issued by mid-market real estate owners and developers to finance real estate assets in Australia
“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,” says Alceon. “The fund invests in secured senior and second ranking loans where the loan-to-valuation ratio does not exceed 65 per cent.”
Previously named the Freehold Debt Income Fund, it was able to return 8.3 per cent (net of fees) over the 12 months to 30 June 2021 with an annualised return of 8.5 per cent since inception in October 2019.
“Since 2016, when APRA introduced lending controls, non-bank market share in Australia has increased from 4 per cent-8 per cent – which is still well below global standards, where non-banks command a 20 per cent-30 per cent market share,” says Khan. So in a way, investors are able to ‘become the bank’ and seek to extract returns that were typically monopolised by the Big Four.
Alceon attributes the fund’s good growth to a simple supply-demand equation. “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,” says Khan.
The fund is now available on Netwealth and HUB24.