Invest via a Zagga Fund
Cash and term deposits have always had strong appeal to self-managed super funds (SMSFs). However, with the official cash rate being at an all-time low, this should prompt trustees to rethink their heavy weighting in cash or near-cash products.
For many savers, cash at-call today is earning minimal interest. Term deposits may yield nominally more, but to receive the highest return, you’re likely to have to lock up your cash for three to five years. Via one of Zagga’s pooled investment funds, wholesale investors, including SMSFs, have the option to include a credible investment alternative to their investment portfolio – one that offers a regular, competitive, fixed-income style of return, fully-secured by quality Australian property.
Introducing the Zagga Funds
Invest in property without buying the bricks and mortar
Investors in a Zagga Fund can invest in quality loans to creditworthy borrowers, all first mortgage-secured by high-quality, Australian property, without the need to personally scrutinise each and every individual loan.
Depending on an investor’s situation and objective, investors can select from one of two Zagga Funds:
Zagga Feeder Fund
The Zagga Feeder Fund has the discretion to invest at a higher average loan-to-value ratio to maximise yield across a diversified portfolio of creditworthy loan transactions. All loans are fully-secured by high-quality, Australian properties.
An investment in the Zagga Feeder Fund may appeal to investors with a moderate appetite for risk.
| Target Return | Target Average LVR | Notice Period |
|---|---|---|
| 6.50% p.a* | 65% | 90 days |
| Weighted average return across all loans invested in by ZFF | Will also consider stretched senior loans | Following minimum lock-up period of 12 months |
Zagga Wealth Fund
The Zagga Wealth Fund targets a fixed income-type return by investing in a diversified portfolio of creditworthy, senior-debt loan transactions at a lower target average loan-to-value ratio of 50%. All loans are fully-secured by high-quality, Australian properties.
Conservative investors may wish to consider an investment in the Zagga Wealth Fund as a risk-mitigated, higher-yielding alternative to cash deposit accounts.
| Target Return | Target Average LVR | Notice Period |
|---|---|---|
| 4.50% p.a* | 50% | 30 days |
| Calculated as current 12-month TD rate (by St George bank) + 4% | All loans first-mortgage secured | Following minimum lock-up period of 3 months |
* After expenses and before fees for the year ending 30 June 2022.
Past performance is not a reliable indicator of future performance and investments in a Zagga Fund are subject to investment risk, fees and costs. Returns are not guaranteed. Prospective investors should fully consider the ZFF Fact Sheet and ZWF Fact Sheet, available from Zagga, before applying to invest. Rates are based on the Zagga CAS score and returns are subject to risks.
| Zagga Wealth Fund | Zagga Feeder Fund | |
|---|---|---|
| Minimum Investment | $100,000 | |
| Target Return* | 4% p.a. above the 12-month Term Deposit Rate offered by St George Bank | 6.50% p.a. |
| Target Average LVR | 50% | 65% |
| Minimum Lock-Up Period | 3 months | 12 months |
| Withdrawal Notice Period | 30 days | 90 days |
| Management Fee |
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Manager, Private Investments
Jacob is a chartered Accountant in Australia and New Zealand and previously worked as a financial auditor for Deloitte. He brings with him a strong work ethic and relationship focus and is committed to providing customised solutions for our investor clients to help provide the best outcomes for them.
Purpose of our Funds
Our Funds have been established to invest in approved loans for 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.
Many investors prefer not to evaluate each loan on a loan by loan basis, but still want to invest in the underlying asset class. Our Funds provides investors with the opportunity to access this alternative asset class that is fully secured by real Australian property.
Investment Strategy
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?
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.
Market risk
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.
Investment risk
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.
Income risk
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).
Liquidity
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.
Structural risks
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.
Diversification risk
In the early stages the Fund will have limited diversity of loans. Diversification will increase as more loans are invested in.
Term risk
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.
In line with the guidance previously published regarding an expected return of between 6.50% and 7.0% p.a. for Zagga Feeder Fund for the year ending 30 June 2021, we are pleased to report that:
- the Zagga Feeder Fund returned 6.50% p.a*. for the six months ending 30 June 2021, resulting in a return of 6.83% p.a*. for the full year ending 30 June 2021
- the Zagga Wealth Fund returned 4.25% p.a*. for the period ended 30 June 2021, being its first reporting period.
Investor distributions will be paid on or before 31 July 2021
* Subject to final verification by the Fund’s auditor. Past performance is not an indicator of future performance.
Given the environment over the past 12 months, impacted as it has been by the COVID-19 pandemic, as well as a declining interest rate environment, ZFF was obliged to hold unusually larger levels of liquidity during the first six months of the Financial Year, whilst also taking an overly cautious approach to any new investments.
ZWF commenced only in February 2021 and has not had the benefit yet of a full investment cycle. Under the circumstances, and noting the Funds’ priority objective of capital preservation and meaningful returns based on responsible investment across a mix of first mortgage secured Australian property assets at conservative LVRs, we consider this performance to be pleasing.
Manager, Private Investments
Jacob is a chartered Accountant in Australia and New Zealand and previously worked as a financial auditor for Deloitte. He brings with him a strong work ethic and relationship focus and is committed to providing customised solutions for our investor clients to help provide the best outcomes for them.
* After expenses and before fees for the year ending 30 June 2022.
Past performance is not a reliable indicator of future performance and investments in a Zagga Fund are subject to investment risk, fees and costs. Returns are not guaranteed. Prospective investors should fully consider the ZFF Fact Sheet and ZWF Fact Sheet, available from Zagga, before applying to invest. Rates are based on the Zagga CAS score and returns are subject to risks.
We’ve created a list of answers to the most commonly-asked questions. Head on over and check it out.
Our team are happy to assist 9 am to 5 pm Monday to Friday. If you prefer, you can send us an email.
1300 1 ZAGGA (1300 192 442) | Or +61 2 9290 8543 | info@zagga.com.au