Montello attempts to reassure UCIS investors
Following the suspension and planned winding up of Connaught Asset Management’s Income Funds, Series 1, 2 and 3, Montello Capital Partners Limited, advisor to the asset manager of the Montello Income Fund, has sought to reassure investors in its UCIS bridging finance fund with its latest quarterly fund report.
The Montello Income Fund, an unregulated collective investment scheme (UCIS), provides a funding line to Montello Bridging Finance and lends directly to end borrowers in the UK real estate bridging finance market, with a focus on London residential property.
The fund targets a return to investors of 8.5% per annum and has an average LTV across the Fund portfolio of 53%.
88% of the Fund is lent against property located in London with the average loan value across the portfolio being £412,000.
The quarterly report, which is scant in detail over the size of the fund, draws attention to the difficulties being faced by a “competing fund” and seeks to reassure investors by making the following statements:
The Montello Income Fund:
– is part of the Montello group of companies, which was set up almost 4 years ago to take advantage of the opportunity presented by the credit crisis and the lack of bank funding. As such, Montello was not lending during the period leading up to the credit crisis, and as a result is not laden with a legacy bad loan book. Montello entered the market essentially at the bottom of the cycle which is a significant advantage as a lender in the markets we have experienced over the last decade;
– lends directly to end borrowers. We do not ‘outsource’ the risk management of the loan portfolio, by lending to other bridging finance companies to then on-lend. The funds are used only for loans to end borrowers. That is, we have total control over every loan at all times;
– focuses on lending primarily against London residential property – which we believe presents a far more sound lending proposition than lending in other areas in the UK (Scotland and Wales for example) and against other types of property;
– can only lend up to a maximum LTV of 75% on all loans. Some funds talk about an ‘average’ LTV, however the Montello Income Fund is capped at 75% for all loans. That is, no one loan can exceed the 75% LTV; and as you see above, our ‘average’ LTV is very low (usually between 50-60%);
– is a true bridging finance fund, in that it only lends on a short term basis. As mentioned above, no one loan is for more than 12 months, and the average loan duration is much less than this (usually around 6 months);
– sits on 10% cash at all times. This provides a significant buffer for investor comfort.