Zagga retains Superior rating by SQM Research

Independent ratings house, SQM Research awards a Four-star ‘Superior’ investment grade rating
to the Zagga Investments Lending Trust for the fourth consecutive year.

March 2024

For the fourth consecutive year, the Zagga Investments Lending Trust (ZILT) has been awarded a 4-star, SUPERIOR rating by SQM Research (SQM).

According to SQM, the key contributing factors for this rating are deep levels of investment experience, strength of company tenure and cross-functional expertise of the team.

"SQM believes the practice of constant communication and the broad-based inclusion of team members in decision-making is a vital ingredient to the success of the process. Interactive peer review and collaboration across a tightly knit group of experienced investors will likely make the best use of their combined intellectual property and shared history."

The strengths of the Trust

The loan originations have shown a steady and material increase over time since their inception. Loan originations have increased significantly since the 1st of July 2021, with no impact on the quality or performance of the book.

The majority of loans include capitalised interest and, either up-front or per tranche, servicing. Interest arrears are generally rare.

Investors receive income as it is earned on the loan interest repayments, with real time reporting of the performance of the loan book to which the investor is exposed.

Management fees are only charged on successful receipt of principal and interest on each loan, not on invested FUM.

The management team are well-experienced with cross-functional expertise in business management and credit lending assessment.

The team maintain a close working relationship with the originator and borrower of the loans.

Zagga’s sophisticated software platform enables fractionation of investment risk and the customisation of a return profile for individual investors, according to the investor’s investment requirements and asset allocation preferences.

ZILT is not a commingled fund where all investors have exposure to identical holdings in a portfolio at a particular point in time. Portfolio holdings are unique for each investor, which reflects the investor’s personal investment.

Exposure to smaller loans reduces the risk inherent in larger-sized failures. Zagga’s loans are typically, shorter-term loans, with terms from six months up to 24 months.

As a result of intensive due diligence processes, the transaction-specific interest rates recognise the individual risk inherent in each loan.

None of Zagga’s loans have been exposed to developer or builder failure, and overall, all construction projects are active, albeit delayed for the respective reasons.

How to invest?

The SQM Report recognises the key ways an investor can invest via the Zagga Investment Lending Trust:

Invest via a Fund

Earn regular income and portfolio diversification opportunities without the need to personally scrutinise each and every individual loan opportunity.

Invest directly

Create a more balanced investment portfolio and predictable returns by investing in individual loans that meet your risk and return preferences.

Since last year's review

The Zagga CRED Fund was launched in September 2023. It is the first unitised fund available on external platforms for financial advisers. The Fund aims to provide investors with an attractive rate of return and regular, risk-adjusted income by investing in a specifically curated portfolio of credit-vetted, mortgage-secured loans.

Zagga launched the Zagga Real Estate Income Fund (ZREIF) – a sub-fund of Victory Nest Asset Management VCC – which aims to provide regular income and portfolio diversification by investing in a diversified portfolio of credit-vetted loan opportunities of the private commercial real estate debt (CRED) market.

With Zagga's investor-first approach, the past year has also seen further creation of bespoke funding entities (e.g. ZILT 8) to suit the needs of Zagga's growing base of investor.

"SQM notes that Zagga’s due diligence is critical to the credit assessment and pricing of the underlying loans. The risk management framework is embedded in the loan approval process and ongoing monitoring of loans."

Download the full SQM Research report

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Please note that research reports are intended for financial advisers and wholesale clients only.

The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.

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