Getting started with
‍UK real estate lending

Our thought on the how private credit allocations can benefit your portfolio

Why real estate private credit?

Private credit involves investing in non-bank loans. In the case of real estate, the loans are secured against the real estate asset(s) of the borrower, with the goal to achieve downside protection as well as returns that have historically been competitive with equity markets. This asset class offers a wealth diversification solution with an attractive risk-return profile that investors can benefit from today.

Why invest in private credit?

  • Target attractive potential returns; 7-12%, collateralized against real estate assets

  • Historically, volatility has been lower than in public equities

  • Diversify your assets

7-12%

Average annual performance of global private credit strategies since 2020 (Preqin)

0.4-0.6%

Share of private credit as a percentage of UK real estate asset allocations

3-5%

Yield premium over comparable public debt, typically with lower volatility

Functioning

Explanation of the J-curve

Call for Funds

Capital calls allow you to efficiently manage your investments. After your initial commitment, we solicit portions of capital based on investment opportunities. These capital calls can be spread over 1 to 5 years. You will receive notifications specifying the amount and transfer date. Once the funds are transferred, we provide regular reports on investment usage and performance. This approach optimizes liquidity management.

Refunds

Capital distributions are made as equity interests are sold, typically through resale to another company, an IPO, or resale to another private equity fund. Because investments and distributions occur over several years, tracking these flows is crucial for assessing the performance of a private equity investment.

Functioning

What are the associated risks?

Risks of partial or total capital loss

Repayment of loans is predicated on the borrower being able to refinance or sell the property for more than the loan amount plus interest. External factors and poor market conditions can impact whether that is viable.

Liquidity risk

Funds are usually lent to borrowers for terms of 6-24 months. If a borrower is unable to refinance or sell an asset within that timeframe, even where the asset value is higher, this can result in delays to repayment. Investors do not have access to their funds until repayment occurs.

Our recommendations for investing with peace of mind

1. Build up a solid emergency savings fund

In order to be able to cope with unforeseen circumstances, it is recommended, before any investment, to build up precautionary savings in non-risky and liquid investments that you can access for a rainy day.

2. Don't put all your eggs in one basket

Spread the risks by spreading your investments across several financial investments.

3. Get informed

Before investing, consult all the information relating to your investment: its characteristics, fees, risks etc.

4. Evaluate the return/risk ratio

The potential for return involves risk. Evaluate the return against market sentiment to determine what you are comfortable with.

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