The Merricks Capital Partners Fund (the Fund) returned 0.8%* in March and a 9.9%* return on an annualised basis since inception.
Heightened market volatility was driven by growing concerns over impending trade tariffs ahead of the 2 April “Liberation Day” announcements. Credit sentiment deteriorated accordingly, with the iTraxx Australia CDS index widening from 68 basis points (bps) into the mid-80s during the month (Bloomberg), which saw the Fund’s CDS hedging strategy contribute approximately 14 bps of return.
The transfer of the liquor licence for the Melbourne Place Hotel project completed in March, satisfying the final condition subsequent required for financial settlement. The loan successfully repaid in early April, returning $48.6m to the Fund (representing 4.4% of the Fund’s NAV). As this loan had not accrued interest for over six months, the repayment enables redeployment into higher-yielding opportunities, which are expected to support an uplift in Fund performance.
During the month, the Fund also finalised the demolition funding to the Sydney-based Pitt Hunter development asset (the additional demolition funding will be a 0.8% allocation for the Fund once fully drawn). This position is structured to be repaid in priority upon sale of the asset, which remains the expected outcome; the value of the site is expected to be enhanced by it becoming “shovel ready” on completion of the demolition. Engagement with potential purchasers continues, with significant institutional property funds progressing due diligence during the month.
A very robust pipeline of opportunities exists with approximately $700m of new loans expected to settle in build-to-rent, large-scale horticulture, and mixed-use commercial real estate. The Fund will continue to underwrite carefully through macro cycles whilst focusing on proactive risk management through diversification across key geographies and sectors.
*These returns are stated net of fees and costs
