There is always a risk in making an investment, and we understand all investors will look for the worst-case scenario. Our fund will only lend to borrowers with a proven track record, up to date accounts, and all go through a rigorous application process to assess many factors. Most importantly, our investments are backed by first mortgages over land and buildings, relatively conservative loan-to-value ratios, and General Security Agreements and guarantees.
Historically, property-backed securities provide some of the least volatile investments in the modern world. Our fund mandate requires us to always hold 10% of funds in cash investments with New Zealand banks to help ensure cash is available to repay investors when needed. In addition to that, Inspire Mortgage Fund has a unique additional reserve fund set aside by the funds manager in the unlikely event of a customer default.
Diversified Risk
Our fund is a pooled investment scheme, meaning deployed capital is in a mix of cash and property-backed securities across NZ. It is also highly diversified with many different types of property assets, generally with an end value under $10m, with most around the $2-4m range. The spread of assets, borrowers and geographically situated properties ensures diversity. The fund also looks for yield, which partly underpins the serviceability of the borrower’s mortgage.
Managers Reserve fund
Our famous reserve fund is unique to other funds in our Industry. Our fund mandate requires the manager to contribute 50% of their annual management fees to a point where the reserve fund is 10% of the total fund value at the close of each quarter. Such monies are to be placed into a cash reserve fund (bonds, term deposits, on-call account), with the manager retaining interest earned. In case of a default by a borrower, these funds are to be used first prior to affecting the fund in any way. This is effectively an underwriting by the fund. It’s unique and puts real skin in the game by the manager.