The Merricks Capital Partners Fund (the Fund) returned 0.7%* in January and a 9.9%* return on an annualised basis since inception. The Fund declared a 4.0% distribution as of 31 January, which is expected to be paid mid-February.
During the month, global markets demonstrated resilience despite geopolitical tensions and economic uncertainties driven by US tariff threats. Bond yields consolidated and finished the month lower (US 10Y 4.54%, AU 10Y 4.43%) as the market digested softer inflation data, boosting confidence that the RBA may commence rate cuts in February (25bps expected) and that the RBNZ will continue easing (50bps expected). Hedging costs for the Fund were 5bps for the month, as credit spreads tightened on the back
of this positive market sentiment.
Within the portfolio, the Fund received a series of repayments from a residential development project in Williamstown, Victoria (0.2% Fund allocation) following the sale of multiple lots under complying presales. Significantly, the contracted sale of the Melbourne Place Hotel (4.5% Fund allocation) was achieved during the month, with financial close on track for March. The exchanged contracts and deposit on trust mark the conclusion of nine months of complex negotiations. Trading for the Hotel was strong during January, with near 100% occupancy during the Australian Open. Fund performance is expected to benefit 2-3bps per month from March as the recycled capital is redeployed into the pipeline of new loans.
The Fund maintains a healthy liquidity position (~9%) to support the funding of new loan opportunities into residential, infrastructure and agriculture sectors. In particular, agriculture presents compelling risk-adjusted opportunities, with the settlement of two substantial agriculture loans ($165m total across our funds) expected within the next 4-6 weeks. Both loans feature modest LVRs (60% and 50%) and defined repayment exits via full or partial property sales. Forecast to return a 10-11% net investor IRR, these loans highlight private credit’s increasing role in financing productive farmland, especially as Australia’s retail banks reduce agricultural lending due to higher capital reserve requirements. Moreover, the agricultural sector continues outperforming expectations, supported by robust export demand, stable land values, and ongoing market dislocation.
*These returns are stated net of fees and costs
