We pool investors' funds into high value commercial loans using mortgages as security
OTG Asset Backed Loan Fund
Quick facts
0.5875% per month*
7.05% p.a paid monthly*
7.28% p.a reinvested*
*Investor return from 1 Nov 21, future yield is not guaranteed
September 2018
Fixed income, illiquid, secured commercial debt
Commercial loans, secured with valuable properties - Popular east coast Australian city markets only
Investment objective
OTG's Asset Backed Investment Fund aims to provide wholesale investors with attractive returns matched with commensurate risk tolerance.
Fund overview
The actively managed fund provides exposure to east coast Australian city markets through a diversified portfolio of 1st and 2nd mortgages secured loans. OTG Capital places loans with leading lenders who offer commercial borrowers competitive conditions where the larger banks usually cannot.
Risks
With all investments, there is risk. Returns are never guaranteed. When a borrower does not pay back a loan, security can be sold to regather capital and any interest and costs. However, if the value of security goes down in combination with a borrower default, we will lose money. Therefore any factors which may result in a property value going down or a borrower being less likely to repay a loan will increase risk.
Specifically, risks associated with secured, fixed income debt include default by borrower, overstated valuations, litigation and documentation risks, inadequate insurance and decline in the property market. This is further explained here and in the Information Memorandum. Therefore, like all investments, there remains systematic risk which cannot be reduced; the overall health of the economy.
OTG Capital loans are always secured against popular residential mortgages with LVRs usually between 60-70%. This risk mitigation provides comfort while minimising possibilities of loan impairments that might compromise our Fund's yield.
Past Performance
Past returns does not indicate future performance. In the past, OTG Capital has rivalled equities without the volatility of returns. The graph shows how an investment of $25k would have grown within the ASX200 and OTG's Asset Backed Loan Fund (if reinvested) since inception. See this link for more details.
While this graph compares the ASX200 and OTG Capital, it does not mean the risk weighted returns are created equal. Equities in the ASX200 are highly liquid and a redeemable return can be priced daily. Investments in OTG Capital are illiquid and the yield is reviewed on a monthly basis. Our comparison simply intends to demonstrate our past performance against a commonly known and used benchmark.
Diversification
Our active Investment Committee utilises multiple city locations, varying loan sizes, 6-18 month loan maturity dates and commensurate investment yields to diversify and protect our investors' funds. Loan are used in residential and commercial settings and range between full service and interest only loans. These loans are typically used in order to bridge other loans or provide funding for development.
Fees
There are no admin fees, no entry or exit fees, and no administrative change fees.
The yield we promise is the yield we pay. All management, administration, Trustee, marketing and regulatory fees are paid before our yield is struck. These fees can vary between 2-4% p.a of funds under management depending on market conditions. See the Information Memorandum for more info on assets under management fees. Our fees are paid before the yield is calculated for investors.
Restrictions
- Wholesale and sophisticated investors only
- Minimum investment of $AU 25,000
- Liquidity - fund redemptions are subject to liquidity (see above)
Details
LVR (loan to value ratio)
between 60% - 70%
Minimum investment
$AU 25,000
Investor
Wholesale/Sophisticated
Management style
Active
Distributions (if selected)
Monthly
Liquidity status
illiquid fund - usually 30 - 45 days
Public Trustee
AMAL - over $AU 16Bn under management
Documents
- ensuring all loans are secured with mortgages over real property assets
- loans are secured with LVRs usually between 60% - 70%
- our loans are generally short term in nature, safeguarding potential risk against interest rate movements, and delivering liquidity to the fund
- If a borrower is unable to pay interest or the loan when due or fail to repay the loan when due.
- OTG Capital ensures all loans are secured by 1st and 2nd ranking mortgages over a valued property located in popular east coast markets. This security can be turned into cash if required.
- This risk may arise where the sale of a property is insufficient to repay the loan in full.
- OTG Capital confirms the appraisal by a reputable valuer before a new loan is made. We adhere to conservative Loan to Value Ratios (LVR’s).
- We face risk when security properties are sold to enforce the mortgage. Proceedings can take time and money which may impact the loan return. This risk is higher in 2nd ranking mortgages.
- OTG Capital’s wholesale lender mitigates this risk by working within a conservative LVR and ensuring it always has industry standard legal documentation held by an external custodian.
- We face risk where the security property secured is damaged or destroyed and no, or inadequate, insurance is held.
- OTG Capital only invests in commercial loans offered by wholesale lenders whose procedures include ensuring all properties are adequately insured at all times during the term of the loan.
- Downward movements in the property market may impact loan security and our ability to fully recover the loan, interest and costs. This in turn may impact the Trust’s returns.
- OTG Capital manages and regularly monitors this risk by strictly complying with its lending and LVR guidelines.
- We also mitigate risk by the short duration of the loans we invest in (usually no longer than 12-18 months).
And if you're still not sure, please call us, we'd be happy to discuss any concerns you have. We also recommend you seek personal advice from a licensed qualified financial planner if you are still not sure.
OTG Capital's fund by the nature of how we invest your money, is illiquid. This means that we are not an "at call" bank deposit facility.
While we don't lock your money in, should you need to redeem your investment with us, we usually provide your funds within 30-45 business days depending on the fund's liquidity and cash reserves available at the time of your redemption request.
We also ask a minimum of 30 days’ notice for redemption of part or all of your funds.
AMAL is a major Australian trustee company with over $16Bn under management.
All aspects of our operation works under the normal Australian Financial Services Licenses (AFSL) and ASICs (Australian Securities and Investment Commission) rules and regulations. The Trusts are wholesale and only open to wholesale investors.
Please refer to our Information Memorandum (IM) and Supplementary Terms and Application Pack for further details.
Wholesale & Sophisticated investors are accepted only, we are not a retail fund. In accordance with the Australian Corporations Act, to be eligible to invest with OTG Capital you are at least one of the following;
- Classified as a sophisticated investor, or;
- You have net assets of $2.5million, or;
- You have a gross income of the last 2 financial years of at least $250,000 per annum.
- Intending on investing $500,000 or more, or;
- Operating a self managed superannuation fund within certain criteria.
- We accept minimum investments of $25,000 and additional amounts in $10,000 increments should you wish to increase your sum later.
- The maximum investment amount we accept is $10 million.
- We have no fixed terms and you can keep your investment with us for as long (or short) as you like.
- Fund redemptions are always subject to the Trust's liquidity (view liquidity tab).
Why would you choose to invest in OTG Capital's fund?
To make better returns than cash term deposit interest rates. If you're satisfied continuing to earn bank interest on fixed deposits that involve meagre returns and long term commitments, then the answer is simple.
We understand everyone's need to hold a certain amount of cash reserves in "at call" accounts for cash flow and liquidity. We also believe that additional cash reserves that don't need at call immediacy should therefore work far harder for you.
OTG Capital's Investment Trust doesn't lock your money in, while still providing solid returns, above term deposit rates. The Fund Managers at OTG Capital have extensive finance industry experience, and OTG Capital's Fund Management have been involved in Asset Backed Investments using mortgages for more than 21 years.
So while OTG Capital as an Investment Trust is over 3 years old now (commenced Sep 2018), this form of investing has provided solid returns even during the GFC years. And while past performance is no guarantee of future returns, using mortgages over real property assets to secure commercial loans is a proven formula that provides a lower risk profile for investors and their funds.
Our offer:
- Diversified short term loan portfolio sourced from a range of lenders
- Secured by real property from Australia's popular east coast city markets
- LVR's usually between 60% - 70%
- No lock-in periods, no hassle
- No entry or exit fees, no set up fees and no admin fees if you wish to switch from income to compounding or vice versa
OTG Capital is not a financial planning organisation, we only provide general advice.
General Advice is an ASIC legal definition that relates to information we provide to You. It means the information is general in nature and does not take into account your personal circumstances or your financial background.
If you are in any doubt, we strongly recommend you seek financial advice from a suitably qualified professional.
OTG Capital is licensed as a Corporate Authorised Representative (CAR#001250963) by Dirigere Advisory Pty Limited under their Australian Financial Services License (AFSL#524371) to provide General Advice only in relation to the OTG Capital Asset Backed Investment Trust.
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Register - pass KYC and qualify as wholesale investor
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