Many investors prefer not to evaluate each loan on a loan by loan basis, but still want to invest in the underlying asset class. Importantly, they also want to do this knowing that irrespective of whether they have invested directly or through a managed investment scheme structure, they are not being exposed to undue risk.
Investing via a Zagga ‘Fund’ provides this opportunity.
PURPOSE OF THE ZAGGA FUNDS
Our Funds have been established to invest in approved loans offered on the Zagga platform for a faster settlement and to pre-empt the time delays often associated with raising funds on a loan by loan basis, thereby allowing loans to be funded more regularly.
The Zagga Funds invest exclusively in loans originated by Zagga, or our accredited introducers. Within 90 days of settlement, these loans will be ‘sold down’ for funding by accredited Zagga investors, via the Zagga platform.
DIRECT OR FUND?
Investors in a Zagga Fund can access portfolio diversification opportunities by investing in loans without the need to personally scrutinise each and every individual loan opportunity. Choosing the preferred option really comes down to:
- how much time an investor wants to spend searching for, and looking at, the opportunities
- the amount of funds they wish to invest
- whether an investor would prefer to target specific transactions and loan types, or invest across a more diversified range of transactions.
THE ZAGGA FUNDS IN DETAIL
Depending on an investor’s situation and objective, investors can select from one of two Zagga Funds:
- the Zagga Feeder Fund (ZFF) - for investments $1 million and above
- or the Zagga Wealth Fund (ZWF) – for investment amounts from $50,000.
Past performance is not a reliable indicator of future performance and investments in ZFF are subject to investment risk, fees and costs. Returns are not guaranteed. Prospective investors should fully consider the ZFF Fact Sheet available from Zagga before applying to invest.
Rates are based on the Zagga CAS score and returns are subject to risks. You can read more here.
Download a copy of The Zagga Feeder Fund brochure for more information.
Download a copy of The Zagga Wealth Fund brochure for more information.
Key features of the Zagga Feeder Fund
Market risk is the risk that negative market movements will affect the price of assets within a particular market. By their very nature, markets experience periods of volatility involving price fluctuations of varying magnitudes. In general, shares and listed property investments experience more volatility than fixed interest investments and mortgages, which in turn experience more volatility than cash investments. For mortgage investments this means the interest receivable from your investment may not move in line with general interest rate markets and the amount you receive as income may vary over time.
The Fund’s investments may be subject to economic variables (including economic growth and inflation) and changes to government policy. These factors are generally beyond the control of the Trustee.
Market conditions such as low or declining demand for real estate may result in the security property being sold for a price that is lower than anticipated and this may ultimately result in a lower return to Investors.
Default and credit risk
There is a risk that the Borrower may default under the terms of the Loan, including if the Loan is not repaid by the end of its term. This may be for a wide range of reasons, including a change in the:
- individual financial or other circumstances of the Borrower; and
- economic climate generally that adversely affects all Borrowers.
The Trustee manages this risk by applying its approved lending policies, collection and management systems (see section 5.7) and the Fund’s compliance programme. All Loans are subject to periodic review.
If a default occurs, the ZILT, either directly or via an appointed specialist third-party, will take all necessary action to remedy the default, including:
- pursuing recovery of arrears of income and capital;
- arranging the issue and service of all default notices and other notices of demand;
- taking possession of the security property;
- exercising the power of sale pursuant to the mortgage; and
- otherwise dealing with the security property and collateral security, such as enforcing guarantees, to protect the Investors’ interests.
The Trustee does not guarantee your investment in the Fund or the payment of any interest or principal in relation to a Loan. Your investment in the Fund is dependent upon the Borrower repaying the principal and interest on the Loan on their due date(s).
An investment in the Fund is illiquid and there are limited rights to withdraw your funds from the Fund after you have submitted, and we have received, your Application Form and have issued you Units.
Investing in an unlisted and unregistered managed investment scheme (such as the Fund) is not like investing directly on your own. The Fund must take into consideration all applications made by all Investors, which can result in different income or capital gains outcomes when compared to investing directly on your own. Therefore, income from the Fund may be different to that received from investing directly on your own. You should obtain professional advice before deciding to invest in the Fund.
In the early stages the Fund will have limited diversity of loans. Diversification will increase as more loans are invested in.
There is a risk that the individual Loans may not be repaid in a timely fashion which may cause a delay or potential loss of capital. The Trustee seeks to manage this risk through the initial Loan approval process as well as managing maturing Loans in a timely fashion.
Regulatory and taxation risk
The Fund’s operations may be negatively impacted by changes to government policies, regulations and taxation laws. Although the Trustee is unable to predict future policy changes, the Trustee seeks to manage this through its risk management and compliance programmes to monitor and manage regulatory change.
Further, Australian tax laws are constantly in a state of flux with the introduction of various taxation amendments which may affect you.
Tax liability is your responsibility; we are not responsible for the taxation consequences of an investment in the Fund. You should consult your own taxation adviser to ascertain the tax implications of your investment.
- The return for ZFF for the six months to 31 December 2020 is 7.15% p.a. NB: Past performance is not an indicator of future performance.
- Investor distributions will be paid, on or before 31 January 2021
- For the financial year to 30 June 2021, given the interest rate environment in Australia, ZFF will target a net return to investors of 6.0% to 7.0%p.a on capital deployed
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