Commercial real estate debt through a feeder fund: A CREDible alternative for those seeking stable investment returns

For many investors, ensuring reliable and steady income whilst also effectively managing risk within their investment portfolios are fundamental priorities essential to achieving investment success. With these two critical factors in mind, an investment in a commercial real estate debt fund can be a potentially less time-intensive and more diversified way for income-seeking investors to gain exposure to commercial real estate debt investments.

In general, feeder funds are pooled wholesale funds that represent a collective investment vehicle where multiple investors pool their capital together to invest. These funds are usually professionally managed by experienced fund managers who deploy capital across a range of investment options. By pooling resources, investors can gain access to a diversified portfolio that spreads risk across different attributes that comprise the underlying asset class.

The Zagga Feeder Fund is a pooled wholesale fund that invests in a diversified portfolio of creditworthy commercial real estate debt transactions that are all mortgage-secured by quality Australian property. By investing in the Zagga Feeder Fund, investors can gain access to a diversified portfolio of commercial real estate debt transactions thereby spreading risk across different loan purposes, security property locations, loan-to-valuation (LVR) ratios, and property and loan sectors. The Zagga Feeder Fund allows investors to gain exposure to the commercial real estate market through debt financing without having to directly source and manage individual loans.

More about the Zagga Feeder Fund

Invest in property without buying the bricks and mortar

Investors in the Zagga Feeder Fund invest in quality loans to creditworthy borrowers, all mortgage-secured by high-quality, Australian property, without the need to personally scrutinise each and every individual loan.

The Zagga Feeder Fund is our flagship discretionary pooled fund that provides investors with the opportunity for regular, defensive interest income without a disproportionate increase in risk. Launched in December 2018, the Zagga Feeder Fund focuses on lending to a specifically curated portfolio of high-quality, mortgage-secured commercial loans in the commercial real estate sector.

Targeting consistent returns with a strong focus on risk management

The Zagga Feeder Fund strives to deliver a net return of RBA Official Cash Rate plus 5.00% p.a. to 6.50% p.a. In order to achieve its target return, the Zagga Feeder Fund may include a mix of senior loans and stretched senior loans within its loan investments.

Here are a few examples of high-quality commercial loan transactions in which the Zagga Feeder Fund was invested.

The Zagga Feeder Fund invests in a well-balanced portfolio of loans originated by Zagga or its accredited introducers. Each loan undergoes a rigorous vetting process to ensure it meets our strict creditworthiness criteria.

Key features of the Zagga Feeder Fund

Minimum investment:

$100,000 (AUD)

Target return:

RBA Cash Rate + 5.00% p.a. to 6.50% p.a.

Minimum term:

12-month lock-up period

Withdrawal notice:

90 days

Management fee:

0.25% p.a.

Distribution frequency:

Monthly (reinvested unless requested otherwise)

Why consider an investment with the Zagga Feeder Fund?

Defensive strategy

The Zagga Feeder Fund prioritises capital preservation, diversification and risk mitigation.

Consistent income

The Zagga Feeder Fund targets regular, predictable interest income, providing a CREDible option for income-seeking investors.

Diversification

Investors in the Zagga Feeder Fund can benefit from the natural diversification of the specifically curated mix of loan types, purpose and location of the underlying assets.

Experienced management

The Zagga Feeder Fund is managed by a team of deeply experienced investment professionals with over 200 years’ combined experience in credit, property and investment management.

‘Superior’ investment grade rating

The Zagga Investments Lending Trust has maintained its four-star, ‘Superior’ grade rating by independent SQM Research for four consecutive years.

$0 loss track record

We have maintained a $0-loss history to investors since inception, repaying more than $800 million, across more than 250 commercial real estate loan transactions.

Investing in commercial real estate debt through pooled wholesale funds like the Zagga Feeder Fund can offer a compelling proposition for investors seeking exposure to this alternative asset class. By leveraging the collective resources, fund management expertise, and strategic approach of such feeder funds, investors can access diversified portfolios of high-quality debt investments, mitigate individual transaction risks, and potentially achieve superior risk-adjusted returns compared to direct investment in single transactions.

As the landscape of commercial real estate continues to evolve, pooled wholesale funds, like the Zagga Feeder Fund, can provide a very CREDible investment opportunity for savvy, income-seeking investors.

Interested in learning more about the Zagga Feeder Fund and how it can fit into your investment portfolio?

*The Zagga Feeder Fund is only available to wholesale/sophisticated investors.

This article is for information purposes only. It does not take into account your objectives, financial situation or needs. Any opinion expressed in this article are of the author and is subject to change without notice. Readers are reminded to exercise caution and use their own judgment when interpreting and applying the information contained in this article.

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