WHAT DOES THE FUND INVEST IN

% pa X balance

of morgage

% pa X life insurance premium amount

ADIF

SPVs

EQUITY INVESTMENT

LOAN

PROPERTY DEVELOPMENT

UNIT TRUST

and/or

The Fund aims to provide investors with regular income by investing in a range of income producing assets through loans made by the Fund to Special Purpose Vehicles (SPVs) that are related parties of the Investment Manager, Australian Diversified Income Pty Ltd. 

 

The SPVs invests in a diverse range of income producing investments that larger investment managers would not normally invest. Some of these assets include:

 

The Fund may also invest directly into other managed investments that invest in income producing assets such as: 

  • Domestic and international bonds

  • Cash and bank bills

  • Corporate debentures and other debt securities

  • Secured and unsecured loans to individuals and businesses

STRATEGIC PARTNERSHIPS 

                                          The SPVs will access some of the investment assets through key business partnerships with high quality businesses. For example, ADI has partnered with                                               Richardson & Wrench, the oldest real estate agency network in Australia to invest in large rental rolls in selected metropolitan and regional centres. 

RESIDENTIAL PROPERTY MANAGEMENT ("RENTAL ROLLS")

ADIF is partnering with one of the oldest real estate businesses in Australia, Richardson & Wrench. Founded in 1858, Richardson & Wrench has been operating for more than 160 years.

 

The Richardson & Wrench network consists of 80 independently owned offices in metropolitan and regional locations throughout NSW and Queensland – and growing. ADIF has invested in one of the R&W’s largest property management agencies located in Sydney. The agency has been in operation for 7 years and has 312 rental properties under management. The residential rental sector is anticipated to remain a major industry segment with revenues forecast to grow to over the period through to 2021-22, to $3.9 billion annually (source: IBIS World, Residential Property Leasing and Management in Australia: Market Research Report IBISWorld, April 17).

How do we achieve an investment return from rental rolls?

Rental property managers, such as R&W, are paid an ongoing percentage of property rents in exchange for providing property management services.

Property management services generally include:

  • Lease negotiation

  • Tenant selection

  • Regular inspections

  • Property maintenance and repairs

  • Management of rental arrears

  • Financial reporting

 

The investment in and partnership with R&W retains the involvement of the R&W property management team.

The rental book is actively managed by the property management team to ensure it meets its owner/ tenant retention and growth. The intention is to create incremental income streams from the tenant base. For example, investment or owner-occupied rental property sales.

DIRECT PROPERTY INVESTMENTS 

The SPVs intend to either invest in or provide finance to property investments that meets its selection criteria, including: 

  • Smaller low-medium density developments 

  • Growth areas in major cities 

  • Strong sales records 

  • Trusted developers and builders 

  • High standard build and fit out 

  • Completed approvals 

  • Ready to build 

The SPVs will maintain a spread of project types with different projected completion dates. In addition, the SPV itself must maintain adequate liquidity in order to meet interest payments on its loan from the Fund. 

The process is shown in the diagram below: 

After the investment is made, the Investment Manager is responsible for its ongoing management within the SPV. This includes monitoring the status of any development against project schedule, ensuring that loan interest is paid when it falls due as well as negotiating suitable terms for loan extensions, where necessary. 

MORTGAGE BROKING & LIFE INSURANCE PORTFOLIOS 

How do we achieve an investment return? 

Mortgage brokers and life insurance advisers are paid an ongoing percentage of the value of loans or life insurance premiums in exchange for providing ongoing advisory services to clients. In effect, an ongoing fee for service (advice).

The percentage continues to be paid until either the loan ceases or the life insurance contract is terminated.

 

Ongoing fees for service in the financial services world has become highly regulated, with oversight from the Australian Securities & Investments Commission.

The Investment Manager’s criteria to select appropriate portfolios includes, but is not limited to:

  • Mature established business (portfolio older than four years)

  • Demonstrate consistency of ongoing income

  • History of writing a consistent volume of business and future growth potential

  • Exhibit a low level of turnover/lapses

  • Clean compliance record, no legal proceedings or other actions

1ST & 2ND MORTGAGE LOANS (SECURED OVER REAL PROPERTY) 

The Investment Manager will use a SPV to offer loans to qualified business and investment borrowers, secured by either first or second mortgage over real property (such as residential, commercial, industrial and retail property).

The Investment Manager will use the following Lending Guidelines:

  • Loans secured by a registered first or second mortgage over real property in Australia

  • Location of properties will be in capital cities and major regional centres

  • Maximum Loan to Value Ratio (LVR) will be 70%

  • Maximum exposure to a single loan is the greater of $2.5m or 10% of the Fund’s total assets under management

  • Maximum exposure to a single borrower is the greater of $5.0m or 20% of the Fund’s total assets under management

  • Maximum loan term is 12 months

PROPERTY DEVELOPMENT FINANCE 

The Investment Manager may invest in a SPV that provides finance to qualifying property investors and developers.

Finance may be provided by way of a loan to a particular project or equity in a particular project (or a combination of both).

The interest rate received on each loan will be variable, depending on a range of factors including the loan term, loan to value ratio, assessment of development risk and the success of the project.

The Investment Manager will use the following investment criteria:

  • Loans must achieve Target Income Returns for the Fund

  • Projects must be in Australia

  • Property investment or development(s) must relate to residential, industrial, commercial, retail, retirement village or accommodation

  • No consumer loans

  • Commercial soundness of the borrower and the borrowing principals

  • Current market value and/or end value of the Development will repay the loan

RISK OF INVESTING IN THE FUND 

There are a number of risk factors that could affect the performance of the Fund and the repayment of Investor's capital. The main risks are summarised below. A more comprehensive description is contained in the Information Memorandum. 

 
 
 
 
 
 

Type of Risk 

Investment Risk 

Investment Manager Risk 

Specific Investment Risk 

SPV Structure Risk 

Investment Performance Risk 

Description

The value of an investment may rise or fall, distributions may or may not be paid and an SPVs or Investor's Capital may or may not be returned. 

The Fund is relying on the skills, experience and ability of the Investment Manager to achieve its investment objectives. This ability may be impacted in the event of any major changes in the Investment Team and its operations 

A borrower may default on their loan and the security provided over the loan may not be sufficient to recover the loan amount. 

The Fund will provide interest bearing loans to the SPVs with the interest rate being set by the Investment Manager based on the risk/return profile of a particular investment 

None of the Trustee, the Investment Manager not any other person or entity guarantees any income or capital from an SPV or the Fund. 

Other risks include: 

Description

The value of an investment may rise or fall, distributions may or may not be paid and an SPVs or Investor’s capital may or may not be returned.

None of the Trustee, the Investment Manager nor any other person or entity guarantees any income or capital return from an SPV or the Fund.

The Investment Manager is not a related party of the Trustee. By making an investment in the Fund, Investors acknowledge that the Fund will make investments in or through related parties of the Investment Manager, such as the SPVs.


Changes in Government legislation, regulation and policies may have material adverse effects on the operating results of the Fund. 

This is the risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimise a loss or make a profit. The Fund is an illiquid investment.

The Trustee is not in a position to confirm the completeness, genuineness or accuracy of any information or data included in this IM. 

Tax regulations can change and changes can be adverse.

There may be external influences from time-to-time, including unforeseen items of expenditure which have not been budgeted for and loss of revenue, which adversely affect the income of the Fund. 

A SPV purchasing mortgage broking or life insurance books may see a decline in value of the books purchased.

 

A SPV lending money on mortgage security could experience loan defaults by borrowers.

There are specific risks for property construction projects such as construction or development costs exceeding budgeted costs, delays in the completion of a development project or a change in market conditions reducing the project’s value.

Type of Risk 

General investment risk 

 

Related party transactions

Legal, regulatory and compliance risk 

Liquidity risk 

Incomplete or inaccurate information 

Tax risk 

Underlying investment risk 

Decline in Mortgage/Life Insurance Book Value Risk 

Loan Default Risk 

Construction and Development Risk 

CONTACT US

        Level 9, 48 Hunter Street

        Sydney NSW 2000 

        info@adigroup.com.au

       

        02 8014 7032

      

LINKS

 

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The Australian Diversified Income Fund (Fund) is an unregistered managed investment scheme in the form of an Australian unit trust. The Fund is only available to investors that are wholesale clients as defined in s761G of the Corporations Act 2001 (Cth) (Act) or sophisticated investors as defined in s761G of the Act.

Australian Diversified Income Pty Ltd is the Investment Manager of the Fund. Australian Diversified Income Pty Ltd is a Corporate Authorised Representative (No. 0001259804) of Rimbal Investment Services Pty Ltd ACN 600 166 774 AFS Licence number 472548. Australian Diversified Income Pty Ltd authority under its Corporate Authorised Representative Agreement with Rimbal Investment Services Pty Ltd is limited to general advice regarding the Fund only. Any other advice provided is not provided pursuant to this agreement.

Vasco Investment Managers Limited ACN 138 715 009 is the Trustee of the Fund and the issuer of its Information Memorandum. This website contains information about the potential issue of interests in the Fund, but it is not intended to be used by any other persons in any other jurisdiction if and to the extent that to do so would be in breach of Australian laws, or the laws of any foreign jurisdiction.

This website contains general information only and is not intended to provide any person with financial advice. It does not take into account any person's (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making an investment in the Fund. Neither Australian Diversified Income Fund, Australian Diversified Income Pty Ltd nor Vasco Investment Managers Limited make any representation as to the accuracy, completeness, relevance or suitability of the information, conclusions, recommendations or opinions contained on this website (including, but not limited to any forecasts made). No liability is accepted by any of these entities or their respective directors, officers, employees, agents or advisors for any such information, conclusions, recommendations or opinions to the fullest extent possible under applicable laws.

This website may contain forward looking statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. The Australian Diversified Income Fund does not undertake any obligation to revise any forward-looking statements to reflect events and circumstances after the date of this publication.

 

Neither Australian Diversified Income Fund, Australian Diversified Income Pty Ltd nor Vasco Investment Managers Limited] guarantee the repayment of capital, the performance of any investment or the rate of return for the Fund. Past performance is not necessarily indicative of future performance.

** The target income return is not a forecast and returns are not guaranteed.