May 9, 2024

Merricks Capital Partners Fund Portfolio and Market Update – April 2024


The Merricks Capital Partners Fund (the Fund) returned 1.0%* in April and 10.1%* on an annualised basis since inception.

Global equity and bond markets finished lower for the month with ongoing headwinds of higher for longer rates and reinflation risk. Credit spreads reacted accordingly with the Fund’s macro hedge strategy adding 3bps (net) to April’s performance. As interest rates stay higher for longer and replacement costs rise, real assets will need to deliver greater income generation to hold their value on a first principles basis.

With Australia and New Zealand facing a short supply of real estate assets, we’re confident that assets with deep demand, such as housing, prime office and primary production farming, will be able to further increase income generation. Those that can’t due to the fixed nature of their income model, such as greenfield developments, B-grade office, will bifurcate on asset values. We expect our senior secured lending strategy, with an average LVR of 60% (weighted portfolio average) against hard assets that can generate higher incomes, to outperform in a challenging macro environment.

In line with our focus on increasing residential exposure in the Fund, one existing loan was amended to increase the Fund’s participation from 2.6% today to approximately 8.0% of NAV once fully drawn. The residential construction project for the delivery of 229 apartments on the Gold Coast, QLD, has seen strong pre-sales (volume and price). It is now significantly derisked at 44% build completion and a residual LVR of 50%.

We expect the Fund to remain fully deployed over the coming quarter as repayments come back from office and New Zealand. Capital demand for our currently preferred sectors across residential, agriculture and specialised infrastructure continues to increase.

*These returns are stated net of fees and costs

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