Private Market Investment Specialists
We focus on capital stable investments in mortgage-backed private credit, until such time compelling opportunities in property development and venture capital make themselves present.
What are the advantages of private investments?
Publicly traded investments such as equities or bonds, often means that all information about a particular asset is known by all parties, which reduces the advantage that any one particular investor can have. Secondly most investment funds are chasing the same income producing publicly traded assets, resulting in high valuations and consequently reduced yields. Private market investments offer investors the advantage of having access to opportunities that aren't known to all market participants, giving a distinct competitive advantage to investors. Secondly, private market investments, are where the bulk of businesses start, before they become publicly traded, providing the opportunity of rapid capital growth.
What is a high yield investment?
The easiest way to calculate the yield, is for example if you pay $100 for a bond, which provides a coupon / interest rate of $5 per annum. The calculation would be $5 / $100, Which means the bond will have a yield of 5% per annum. Alternatively, you may have a property, that you purchased for $1 million dollars, with rental income of $60,000 per annum. In which case the yield would be $60,000 / $1,000,000, equalling 6% p.a.
Yields vary from one asset type to another, and the risk profile of the asset. Generally the more risk, the higher the returns. However, this isn't always true. For example, if you bought that same above property for $800,000, that still had a $60k rental income, then your yield would go up to 7.5%. So as you can see yield is a function of the return the asset makes, and the price at which you're purchasing the asset.
If you are providing credit or buying debt, then that credit that has been provided is an asset! As debt has the ability to generate income in the form of interest, and usually comes with underlying security.
At Royce Stone Capital we specialise in mortgage-backed private credit. The debt investors buy, is secured by property or an alternative asset of some type. This provides investors with recourse, and interest repayments. The risk assessment is based on the collateral (what is being provided as security to ensure investor funds are protected in a worst-case scenario), their capacity (ability to service the debt, how they will repay interest and exit the debt ultimately) and their character (are they of good character and entering agreements in good faith).
What is a sophisticated investor?
As per ASIC guidelines which you can read here. A sophisticated investor must meet the below criteria in order to participate in our financial products.
"A person is only eligible to be the subject of a certificate if they have:
- a gross income of $250,000 or more per annum in each of the previous two years or
- net assets of at least $2.5 million (reg 6D.2.03 and reg 7.1.28).
The rationale is that people meeting one of these criteria are more likely to be able to evaluate offers of securities and some financial products (such as interests in managed investment schemes) without needing the protections of a regulated disclosure document."
