What Is Capital Preservation?
Capital preservation refers to the strategy or objective of safeguarding the initial value of an investment or capital.
Investors who prioritise capital preservation aim to minimise the risk of loss and ensure that their principal amount remains intact or experiences minimal decline. Consequently, this wealth protection approach often aligns with a conservative investment strategy, where the focus lies on protecting capital rather than chasing high returns.
Furthermore, investors actively seeking capital preservation or wealth protection typically choose lower-risk and more stable investments, such as:
While capital preservation remains a crucial consideration, it’s essential to acknowledge that investments always entail some level of risk. Moreover, even seemingly low-risk investments may encounter influences such as inflation, market fluctuations, or shifts in economic conditions. Therefore, investors should actively evaluate their risk tolerance, investment objectives, and time horizon when adopting a strategy focused on capital preservation or wealth protection.
Mark Roberts, Managing Director of PrivateInvest, emphasizes, “Capital preservation and wealth protection aren’t merely financial strategies. Instead, they signify a dedication to the enduring strength and resilience of our organization. By prudently safeguarding our resources, we establish the groundwork for sustainable growth, innovation, and long-term success. Furthermore, it’s not just about safeguarding dollars; it’s about preserving the value we deliver to our investors.”
The PrivateInvest Capital Preservation Investment Objective and Strategy
PrivateInvest actively pursues the strategy of delivering above-average industry risk-weighted returns to wholesale investors, paying out monthly. Moreover, the investment strategy revolves around offering investors professionally managed exposure. This exposure is to a diversified portfolio of finance income returns derived from commercial debt opportunities in the A$3 million to A$25 million loan size range.
Additionally, PrivateInvest secures investments with first mortgage securities (and, in most cases, additional guarantees), maintaining a loan-to-value ratio of approximately 60%. This strategy ensures protection against major market deterioration and serves as the foundation for maintaining capital preservation, irrespective of market or individual loan movements.
PrivateInvest First Mortgage Income Fund
The First Mortgage Income Fund operates as a pooled, open ended, unregistered unit trust tailored for sophisticated professional investors.
The Fund’s objective is to offer wholesale and professional investors professionally managed exposure to a national diversified portfolio of commercial finance secured by registered first mortgages over real estate. Since its inception in 2018, the Fund has consistently generated average returns of 8.73% per annum after fees and expenses.
This Fund is a “pure play” Fund, indicating there is no subordinated debt or debt leverage utilized to boost investment returns.
The structure of the First Mortgage Income Fund places a strong emphasis on Capital Preservation.
Distributions are paid on a monthly basis.
PrivateInvest Select Mortgage Trusts
PrivateInvest offers the Select Mortgage Trusts as contributory mortgage trusts. Structured as unregistered unit trusts, specifically targeting wholesale investors. Moreover, in a contributory mortgage trust, investors have the choice to select the specific loan(s) they wish to invest in. Each loan(s) is secured by registered first mortgages over real estate. Furthermore, investors can allocate their investment across units in the trust linked to their chosen loans, effectively segregating the risks and returns associated with each loan.
This structure empowers investors to actively choose their level of participation and investment in specific trust loans. Additionally, other lenders have the opportunity to syndicate these loans under bilateral facility agreements with PrivateInvest. Furthermore, income distributions are timed variably based on the underlying loan(s), occurring monthly, quarterly, or upon loan maturity.
From an investor’s standpoint, due diligence and loan assessment procedures, including forecasting any applicable development potential and valuation, are crucial. This ensures that the projects under finance meet suitable qualification criteria and forecasted targeted returns. Moreover, the structure of the Select Mortgage Trusts places a strong emphasis on Capital Preservation.
PrivateInvest Capital Trusts
PrivateInvest Capital Trusts provide access to preferential equity, or second mortgage debt opportunities. As the Fund and other Trusts do not offer equity or mezzanine finance, Capital Trusts allow investors to access a broader suite of investment opportunities and profiles.
PrivateInvest’s Capital Trusts has been structured with an emphasis on Capital Preservation.
About PrivateInvest
PrivateInvest is a funds manager and lender in the Australian property sector, providing a suite of bespoke financial services to investors and borrowers.
Wholesale Investors rely on PrivateInvest to deliver above average risk adjusted returns in the commercial real estate debt market. We achieve this through equity, mezzanine debt, preferred equity, and hybrid debt instruments.
Qualified borrowers in the middle market segment access capital from PrivateInvest for tailored property financing. PrivateInvest provides support and personalised solutions that borrowers “can bank on”.
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