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Merricks Capital Partners Fund Portfolio and Market Update February 2023

The Merricks Capital Partners Fund (the Fund) returned 0.7% in February and 10.3% on an annualised basis since inception.

Fund performance was reflective of February being the shortest month of the year and one loan restructure concluding which ended a period of higher interest on the investment.

The Fund’s macro credit hedge strategy (CDS) was flat for the month, with credit spreads appearing under-priced considering the intensifying macro risk anticipated. As part of the portfolio’s risk management against major credit events, the Fund added an additional 10% to our insurance portfolio at the start of the month protecting the Fund against any future macro dislocation.

During February we assessed and monitored the impact to New Zealand investments relating to “Tropical Cyclone Gabrielle”. The Investment Management team have been on the ground at the higher risk sites in Auckland & Hawkes Bay region and there has been no material damage to date across the 11 New Zealand loans in the portfolio. Two New Zealand loans with construction exposure, a hotel in Auckland and a town centre development in Mangawhai experienced minor project delays, but with no impact on the expected outcome of the loan repayments.

One loan repaid during the month, a $18.2m Residual Stock Facility funding the sales program for a mixed-use development in Melbourne’s CBD. The loan repaid five months early, returning 8.0% IRR (net of fees). No new loans settled in February. Loan structuring and due diligence progressed on $850m of exclusive new opportunities across commercial real estate and agricultural lending investments with approximately $200m expected to be allocated to the Fund when settlements occur over the coming months.

 

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