Alceon’s flagship real estate fund awarded ‘Superior’ rating

Alceon’s flagship real estate debt fund has been awarded a ‘Superior – High Investment Grade’ rating for 2023 by Australian investment research house SQM Research.

Alceon’s Real Estate Credit Fund was awarded 4.25 stars by SQM – the second-highest available grade – as part of its annual ratings review, falling within the research house’s ‘High Investment Grade’ category.

This grade, SQM notes, is awarded to funds with a “substantial potential to outperform over the medium-to-long term”. Only one in four funds rated by SQM achieve a grade of 4.25 stars or higher.

The Alceon debt fund lends to Australian mid-market real estate companies to finance real estate assets, primarily in residential markets. A small portion of loans are also made to industrial, retail, specialised office and property-backed corporate entities.

Since its inception in late 2018, the fund has achieved 9.6% returns per annum. In the six months to 31 October 2023, it delivered 11.4% in annualised returns.

As part of its assessment process, SQM recognised the credit fund’s “thorough and robust” investment and lending process. “Significant due diligence” is undertaken for its investments, SQM added, with “independent property and construction industry experts engaged along the investment pipeline” and a “series of monitoring protocols… in place to mitigate default risk”.

SQM also recognised the fund’s low-risk structure, with “a large allocation to senior secured first mortgages at relatively low/modest LVRs”.

“[This] means that the fund is lower risk than other funds with a lower allocation to senior debt and at relatively higher LVRs. The fund returns have been solid and have matched expectations.”

Alceon notes that the fund is conservatively structured with a majority of loans comprising senior first mortgages at relatively low loan-to-valuation ratios (LVRs) and supported by some of Australia’s leading private wealth firms, family offices and offshore financial institutions.

The fund maintains around $600 million in funds under management, delivering a return volatility of 0.15%.

The fund is diversified across 89 loan facilities, 49 separate borrowers, with 88 per cent of the portfolio invested in first mortgages/senior debt and a weighted average LVR of 61 per cent.

Alceon, an Australia and New Zealand-based alternatives-focused investment manager, maintains a total real estate private debt portfolio comprising of approximately $3 billion managed across a series of open-ended funds, close-end syndicates and institutional separately managed accounts (SMAs).