June 12, 2024

Merricks Capital Partners Fund Portfolio and Market Update – May 2024


Hawkes Bay, New Zealand

The Merricks Capital Partners Fund (the Fund) returned 0.7%* in May and 10.1%* on an annualised basis since inception. The Fund intends to declare a 4.0% distribution on 31 July 2024, which will be paid in mid-August.

Global equity markets bounced back to a positive month in May while bond yields traded in a tighter range. Credit and FX hedging cost for the month was 13bps of Fund performance as a result of credit spreads tightening in a risk-on environment. Australia’s CPI print at 3.6% indicates a higher for longer rate environment, and the housing market’s continued supply-demand dislocation is evident with YoY rent growth at 7.5%.

The Fund received full repayment of a loan facility this month, representing 1.6% of the Fund’s NAV for an A-grade Office building in Melbourne’s inner suburb of Balaclava. With leading sustainability features, the development achieved rents approximately 20% higher than its 2022 valuation, highlighting the market’s preference for new Office stock over aged stock. We anticipate further Office sector repayments over the next six months, reducing the Fund’s 18.5% of NAV to near-completed Office projects.

The Fund also received part repayment on a loan facility, a 0.5% allocation, to a horticultural business with apple orchards in Hawkes Bay, New Zealand. The part sale of the orchards in line with 2022 valuations represents an excellent outcome for the borrower after the regional impact of Cyclone Gabrielle in February 2023. Full repayment of this loan is expected by the end of June, with the settlement of the residual orchards that are under contract.

Based on significant capital demand in the residential, agriculture, and specialised infrastructure sectors, we expect to see the Fund remain fully deployed as Office and New Zealand loans are repaid over the next few months.

*These returns are stated net of fees and costs

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