Westbrooke Alternative Asset Management opens Q3 fundraise for its high-yielding Yield Plus fund, offering returns between 7% and 9% amid rising demand for private credit investments.
Against a surge in assets under management (AUM) in alternative investments, particularly private credit, Westbrooke Alternative Asset Management has opened the third quarter (Q3) fundraising for its flagship Yield Plus fund.
A Morgan Stanley report quantified the size of the private credit market at the start of 2024 at approximately $1.5 trillion, up from approximately $1 trillion in 2020. The report estimates the market will grow to $2.8 trillion by 2028.
“Alternative investments have continued to gain favour among local and global investors looking for yield amid the sustained high interest rate environment and ongoing volatility in global equity markets” explains Dino Zuccollo, Head of Investor Solutions, Westbrooke Alternative Asset Management.
“These investments also offer numerous other benefits, such as diversification, lower correlations to listed equivalents, and tax efficiencies.”
Among the various private market assets available, private debt (also known as private credit) has emerged as one of the more popular alternative investment options in recent years.
“This demand is clearly evident from our previous quarter fundraise, which attracted more than £15 million (over R350 million) in Q2 2024, taking our year-to-date fundraising total to over £30m.”
Zuccollo attributes this demand to the fund’s six-year track record of performance, during which it has consistently achieved a net investor return of between 7% and 9% per annum in British Pounds Sterling (GBP), which translates into an even stronger return in rands. “This return is significantly above that currently achieved by comparative cash, bonds and fixed-income investments” adds Zuccollo.
With over £170 million in AUM, this fund provides investors with a high-yielding, fixed-income alternative investment through a diversified portfolio of approximately 50 senior loans mainly secured against property in the UK and surrounding areas.
Moreover, Westbrooke embraces a dynamic and proactive approach to improving accessibility while protecting investor returns, evidenced by the alternative asset manager’s decision to drop investor lock-in periods and its early decision to shift from the fund’s predominantly floating rate structure.
Despite initially modelling transaction flow for the high interest rate environment, with 90% of transactions at inception linked to the Bank of England’s (BoE) floating rate, Westbrooke earlier this year made changes to the fund ahead of the anticipated turn in the interest rate cycle, writing an increasing amount of new loans with fixed rates.
The fund, now balanced 50/50 between floating and fixed rate structures, was well positioned when the BoE cut interest rates for the first time since March 2020, lowering its base rate by 25 basis points to 5% at its August meeting.
“We also implemented an interest rate floor on floating rate loans where possible, which will maintain the spread rate to meet the fund’s cash-plus mandate and ensure returns do not go down in unison with declining interest rates” adds Zuccollo.
Removing the initial lock-in period is the other significant innovation introduced by Westbrooke to protect the fund and investors.
“Lack of liquidity is the major risk in private debt investments, but we have taken steps to transform the fund’s risk profile by removing the 18-36 month lock-in period previously required” explains Zuccollo.
Investors simply need to give six months’ notice to access their capital in June or December annually. This effectively offers the liquidity benefits of a fixed-term deposit but with up to a 9% return compared to the average money market return of 5%.
“We also enhance the post-tax return for our investors with innovative tax structuring, as the income earned is either a capital gain or dividend in nature, which is more tax efficient.”
Zuccollo encourages investors looking for a unique investment driven by an asymmetric risk/return profile to diversify their portfolio and earn risk-adjusted cash+ returns that beat the inflation and interest rate hurdle to secure their allocation in the Q3 2024 fundraising before the 23 September deadline.
Source: BizNews
