Commercial property lending specialist Thinktank has launched two fixed income trusts specifically targeting SMSF investors seeking income-yielding investments in the current low interest rate environment.
“For investors who are seeking yield without the volatility or uncertainty of equities we feel these trusts will be of significant interest to them,” Thinktank chief executive Jonathan Street said.
Both funds offer the opportunity to invest in the “small ticket” sector of the commercial property market, defined as assets with a value of approximately $1 million, via bonds with the capital raised being used for lending purposes.
The Thintank Income Trust invests in investment grade and above properties and as such is considered low risk. The fund is looking to generate a net return of 5.33 per cent per annum with interest paid monthly. The minimum investment term is 12 months and no entry or exit fees are charged when the investment is held for term.
“All of the loans are secured by first mortgage and supported by personal guarantees from parties to the loan,” Street explained.
“We also supplement the risk mitigation in the fund by having a loss reserve of up to 1 per cent,” he added.
“We can increase that at our discretion but that’s what we’ve committed to. So there are funds sitting there [to cover] a shortfall from the recovery of a loan and immediately apply to losses to protect investor interests.”
The Thinktank High Yield Trust is similar to the Income Trust but aims to provide a net return of 8.55 per cent per year again paid monthly. The underlying assets are classified as low to medium risk as they consist of second mortgages.
“When we’re talking about second mortgages it’s not where there is a first mortgage to another lender it’s where [Thinktank] is taking the first mortgage,” Street said.
The loss reserve for the High Yield Fund operates up to 2 per cent due to the slightly higher risk profile of the offering. In addition the loans issued are short dated and must be repaid within three years.
Thinktank is only making the funds available to wholesale or sophisticated investors with the minimum investment amount set at $10,000.
“We are [expecting significant demand from the SMSF sector] to be honest. It’s a natural type of diversification and income product for SMSF investors to the extent that they meet the wholesale and sophisticated [investor] threshold,” Street said.