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Merricks Capital Partners Fund Portfolio and Market Update March 2022

The Merricks Capital Partners Fund returned 0.6% in March and 10.4% on an annualised basis since inception.

Underlying loan portfolio income was up for the month (0.7% from 0.6%) due to new investments settled in February and two existing loan extensions, where opportunities arose to earn forecast IRR’s above the Fund’s target return of RBA cash rate +8% and at LVR’s less than 60%. Credit Default Swap (CDS) spreads narrowed in March as concern about credit defaults in global markets stemming from the Russian / Ukraine conflict lessened compared to February peaks. The CDS’s responsiveness to credit market risk is why we utilise it as a cost-effective credit insurance investment strategy for the Merricks Capital Partners Fund.

As part of our balanced portfolio approach, we continue to maintain a high-level of investment diversification. The portfolio comprises 43 senior secured loans diversified across our three primary asset classes and fourteen sub-sectors and is additionally diversified by geographic spread and borrowers.

On a macro level, we are closely tracking inflationary pressures and supply chain challenges within our target investment sectors and globally. There are clear indications that demand for residential housing will remain robust in 2022 and into 2023, with Domain showing vacancy rates at a record low of 1% nationwide in March and residential dwelling values having increased 21.6% year-on-year (CoreLogic), the highest annual growth rate since 1989.

The investments team focused heavily on loan due diligence in March with six new investments scheduled to settle in April totaling $162m of deployed capital, with a weighted forecast IRR of 9.9% (net of fees and costs) for the investments.

Our investment outlook for deploying private credit across asset-backed opportunities in Australia and New Zealand remains positive. We have $280m of agriculture credit opportunities under term sheet and a total of $549m of commercial real estate investments in due diligence and moving towards financial close.

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