Zagga Feeder Fund
The Fund provides the opportunity for regular, defensive interest income without a disproportionate increase in risk.
The Zagga Feeder Fund, launched in December 2018, is a flagship discretionary pooled fund designed to deliver regular, defensive interest income by focusing on high-quality, credit-vetted loan transactions within the private credit real estate sector.
The Fund primarily invests in Australian senior debt, secured by real property via short to medium-term mortgage loans, generally up to 24 months. The intention is to keep capital fully deployed and the fund is unleveraged. Investors gain a fractional share in each underlying loan.
The Fund aims to provide stable cash income and capital preservation through exposure to the Australian Commercial Real Estate Debt market, though investors should note that all investments carry capital risk.
Launched in December 2018, 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.
Investment strategy
The Zagga Feeder Fund (ZFF) focusses on lending to a specifically curated portfolio of high-quality, credit-vetted loan transactions in the private credit real estate sector.
ZFF invests predominantly in senior debt and will earn a return on each loan funded for the specific term. The intention is to keep the assets of ZFF fully deployed1.
Underlying Assets
Short to medium-term loans to approved borrowers. These loans, generally up to 24 months, are typically mortgage secured by real property located in Australia and are originated, funded, managed and administered via the Zagga platform.
In each case, ZFF may own 100% of each loan which it funds for the specified period. The Trustee may reduce the investment in any loan after the expiry of 90 days2, or extend the 90 days period for a further term, at its election. Investors in ZFF own a fractional share in each loan.
Income of the Fund ZFF will earn income from:
- the specified investor return on each investment
- other sources as determined by the Trustee
Recycling
During the Fund Term, any principal repayments by borrowers may be reinvested in loans to new borrowers.
Capital Deployment
Intention is to keep capital deployed to the fullest extent possible (not guaranteed)1
Leverage
This is an unleveraged fund.
Capital Risk
All investments carry some degree of risk. Investors carry the risk of capital losses in ZFF. Neither ZFF nor the Trustee shall be responsible for any loss incurred on any loan funded, except where they have acted unlawfully, recklessly or fraudulently. There is no guarantee of the investment result, the return of capital, or the amounts payable to investors.
1 Subject to any liquidity buffer. There could be periods where funds are not fully deployed. Unallocated funds will be invested by the Trustee, at its discretion.
2 This period is indicative and could differ per investment in a loan.
ZFF is a pooled investment scheme incorporated under Trust Deed with Zagga Investments 2 Pty Ltd, a wholly-owned subsidiary of Zagga Investments Pty Ltd, as its Trustee. Zagga Investments Pty Ltd is appointed the Manager of the Trust. The Trustee is a Corporate Authorised Representative of the Manager which holds an Australian Financial Services licence and is authorised to deal in investments of this nature. An associate group company, Zagga Market Pty Limited, is an Australian Credit Licensee.
Investors will own a fractional interest via ZFF, proportionate to their investment in ZFF, represented by an Investment Certificate (which confers legal title to the fractional share of the underlying asset).
- Commercial Real Estate Debit (CRED) refers to loans made to commercial borrowers who require funding for real estate purposes
- Loans maybe used to purchase or develop, vacant land or property buildings
- Land or property is mortgage collateral for the loan, and investors earn income from the fees and ongoing interest paid on the loan
- CRED ranks ahead of equity
If you’re looking to diversify your portfolio beyond shares, fixed income and traditional property investments, ZFF could help you meet more of your goals by investing in the growing opportunities of the Australian CRED market.
ZFF aims to provide investors with risk-mitigated, stable cash income and capital preservation via a portfolio of investments with exposure to CRE loans. All transactions are secured by registered mortgages against real property in Australia, diversified by borrower, loan type, property sector and location.
Zagga is a leading Australian alternative real estate investment manager, committed to delivering attractive, risk-adjusted investor returns, and tailored private credit solutions, across the capital stack. Zagga was established in 2017, during which time it has consistently delivered strong, annualised returns to its investors across a range of loan purposes, credible counterparties, comfortably valued security properties, and efficient investment management and reporting.
To date, Zagga has:
- originated over 300 loans for more than $2.5 Bn
- current active AUM in excess of $1.4 Bn
- both direct- and fund-focused investment options
- a team of 50 across Australia, New Zealand, Hong Kong, Singapore and the Philippines
- an unblemished record in paying borrower drawdowns, investment distributions, and returning investor capital.
CRED is provided by traditional and alternative lenders and is a subset of the broader Private Debt asset class which allows exposure to the property sector but avoids the high cost of buying and owning an investment property, and the limited liquidity such an asset offers. CRED instead provides the ability to be secured by underlying property assets which ensures lenders have recourse if the borrower defaults on their Loan.
The Investment Manager’s objective is to generate high yielding alternative investment opportunities through facilitating the funding of high-quality loan transactions.
The Investment Manager’s success to date is based on the competence of its team, the efficiency of its bespoke platform, and the extensive experience of its executives and contracted advisors. ZI’s expertise covers the full process from deal origination to asset recovery.
Alan practised for a short time as a solicitor, prior to embarking on a more than 30-year career in banking and finance, mostly as a C-suite executive in two publicly listed banking groups. He has worked in the UK, South Africa and Australia and has consulted widely to owner-managed businesses across strategy, technology and operations. Alan’s entrepreneurial pursuits include being co-founder of a Sydney-based family office investment advisory business and developing a home loan over the phone business for a large Australian insurer. Alan co-founded Zagga in 2016 and has held the CEO role since inception.
“Since our first loan investment in 2017, we have demonstrated to our investors the value of including CRED-type alternative investments in their investment portfolios. These investments are typically non-correlated to equity markets, can be inflation-proof, and deliver consistent and sustainable annuitized returns well above bank deposit rates without a commensurate increase in risk.”
Frank has been involved in the finance and property industry for over 25 years. He is a Certified Funds Manager and Property Valuer, a Fellow of the Australasian Institute of Banking & Finance and Governance Institute of Australia, and a member of the Property Council of Australia NSW Capital Markets Committee.
Frank has held senior and management positions in Corporate, Institutional and Property divisions in Australia’s major financial Institutions. Frank holds a Master’s degree in Property Investment & Development and has completed a substantial number of development projects in his own right in various capacities including financier, developer, superintendent and advisor.
Tom is an experienced banker and property developer/investor with substantial experience in investment for special situations and real property via both private credit and mainstream capital markets. At Zagga, he oversees loan origination and credit underwriting. Previous roles include Relationship Credit Manager ANZ Corporate Property Group; Associate Director ANZ Singapore; and Associate Director Secured Lending, with work completed for major Australian banks, fund managers, insolvency firms and private developers.
Steven has been a part of the core team, playing an instrumental role in shaping Zagga, since its inception. With a wealth of experience in portfolio management, investor relations, and capital markets, Steven brings a multifaceted skill set, and a track record of success, to his role.
As a Chartered Accountant (CA ANZ) with a background in corporate restructuring, Steven is entrusted with overseeing Zagga's treasury and fund management strategies, ensuring optimal financial performance and risk mitigation. His proficiency in navigating complex financial landscapes has been pivotal in driving Zagga’s growth and performance to date.
- loan purpose (land-bank facility, construction, residual stock, bridging loans)
- property type (residential, commercial, industrial or vacant land)
- property location (metro, regional, state)
- loan term
- loan to value ratio (LVR)
- Security is always 1st registered mortgages and can be over residential property, commercial property, industrial property or vacant land.
Investors who choose to invest via one of our Funds enjoy natural portfolio diversification from the diverse, carefully selected mix of loan types in which the Funds invest.
Our proactive management of all borrower facilities means we are constantly stress testing all our loan exposures to changes in rental yields, capitalisation rates, general market conditions and the effects of these on all factors and valuations.
Like any type of investment, potential investors should always understand the risks involved and we encourage all our investors to conduct the due diligence necessary to make the best investment choices for their risk appetite and investment criteria.
Before you make an investment decision it is important for you to identify your investment objectives and the level of risk that you are prepared to accept. Zagga provides a tool to assist you in determining your investment objectives and risk tolerance, however Zagga does not provide you with personal advice that any investment you make will be suitable for your personal circumstances or that the investment will meet your investment objectives. Therefore, we recommend you seek independent financial advice before making a decision to invest.
The significant risks in investing funds to be advanced under a loan include:
- Credit risk
The risk of loss arising from the failure of a borrower to repay some or all of the money they owe.
- Borrower defaults
If a borrower defaults, there may be shortfalls where the sale proceeds of the security property are not sufficient to recover in full, the invested funds and costs incurred by the Trustee in enforcing or recovering the repayment of principal and interest under the relevant loan.
- On winding up of the Trust
After trust property has been realised and costs and other expenses have been deducted, if there is a negative dollar amount (shortfall) in the calculation of the entitlement of an investor to a distribution, the Trustee may ask the investor to pay such shortfall if the Trustee in its discretion, believes to do so is in the best interests of all of the Trust’s investors, requiring the investor to have contributed more than the original principal invested.
- Term of investment and liquidity risk
Subject to the terms of the Trust Deed, once you have agreed to invest funds in respect of a particular loan, you are committed to the investment for the full duration of the loan term, which can range from three months to two years. Therefore, once exposed to a loan, your investment is essentially illiquid in nature. You may be unable to convert to cash, the portion of the principal component of a loan you agreed to fund. You must take this into consideration when deciding on what loan types will be suitable for you in light of your overall investment portfolio and needs.
We acknowledge the risks of investing to fund loans and have put in place many checks and controls to mitigate your exposure to risk:
- all applicants undergo rigorous screening including a full identity check, credit history check to determine their expected ability to service debt, and risk-assessed by our team of experienced credit professionals
- all loans are secured by a registered mortgage over residential property, commercial property and/or land, in addition to any other security that might be required from a borrower as part of the loan approval terms
- investors’ money and borrowers’ repayments are held separately from Zagga’s own assets, in a bank account in the name of the Zagga Investments Lending Trust. Loan funds are only released to the borrower when the loan is finalised and settled by our solicitors
- we monitor all loans and borrower repayments closely and will take immediate action if a borrower fails to meet their repayment obligations.
Despite these measures, if a loan default occurs, there is a risk that an investor with a beneficial interest in the loan:
- may not receive all of their monthly payments
- could lose a portion or all of the principal amount they have invested to fund that particular loan,
- could potentially be required to contribute towards any shortfall on winding up of the Trust.
Therefore, you need to be comfortable with the level of risk you are exposed to when choosing the risk level of the loans you are willing to fund, the terms of the Trust Deed, and investing in this manner generally.
It is important to note that while you, as an investor, have a beneficial interest in the loans that you have invested in, only the Trustee of the Zagga Investments Lending Trust has the discretion under the Trust Deed to exercise a right in respect of loans that form part of the trust property. The Trustee may, but is not obliged to, consult with investors exposed to a loan about how the Trustee should exercise the rights attached to that loan, including rights to enforce, compromise or waive repayment of the loan.
Zagga fractionalises loans into $100,000 amounts, so for example, if a borrower requires a loan of $1,000,000, this loan is fractionalised i.e. it is broken down into 10 multiples of $100,000. As an investor, you may lend the full amount, or in multiples of $100,000.
Fractionalisation allows multiple investors to take part in a loan, each with their own fractionalised participation.
Investors’ fractional share of the loan and underlying security is protected by our unique Zagga Investments Lending Trust structure. Each mortgage is individually registered in the name of Zagga Investments as trustee for Zagga Investments Lending Trust, and each investor is recorded as a beneficiary for their fractional share of the loan and underlying security in a specific sub-trust. The Trust has been specially established to manage investments in loans, together with their corresponding security.
Each loan is separately established within the Zagga Investments Lending Trust. Investors’ interests are not pooled. This is to protect investors’ funds and to ensure that activity in one loan does not affect another. Zagga Investments Pty Limited enters the loans as trustee of the Zagga Investments Lending Trust, and holds the associated rights and benefits in respect of the loan and the mortgage security, and amounts paid by a borrower as trustee for the investors. Each investor investing in a loan has a beneficial interest in the loan and the security proportionate to the amount that the investor invests.
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