An ideal hedge as rates rise and credit risk ratchets up

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Livewire Markets

The rise of Australia’s official interest rate plays directly to the strengths of the Qualitas Real Estate Income Fund (ASX: QRI).

QRI is a portfolio of investments with exposure to Commercial Real Estate (CRE) debt investments which are secured by real property mortgages. Located primarily in Australia, these loans are diversified across borrowers, loan types, property sectors and locations.

As of 31 May 2022, 51% of QRI's portfolio is based on a variable interest rate. The variable rate is calculated on BBSY as at 1st business day of each month, meaning that these increases will directly be passed through to investors in the next monthly distribution.

QRI manages a book of 39 individual loans, predominantly first mortgages, with an average loan-to-valuation ratio of 66%.

The portfolio composition remains very simple. We know every security, property and borrower intimately, to ensure the covenants for the loans are adhered to and that any potential issues are predicted and dealt with in a timely manner.

We’ve maintained an enviable track record of zero losses of investor capital since we launched the firm back in 2008. The following attributes have been key in achieving this:

  • An arms’ length separation of Qualitas’ Investment teams, risk teams and investment committees, and
  • A strong focus on sponsor quality, which means only the highest-quality loans are approved after a detailed process covering initial valuation, detailed due diligence, formal investment committee meetings, third-party documentation provision, and loan settlement.

Click here to visit the Qualitas website

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The Trust Company (RE Services) Limited (ABN 45 003 278 831, AFSL 235150) is the Responsible Entity of the Fund. For further information on the Fund please refer to each Fund’s PDS and Target Market Determination which is available at qualitas.com.au/qri Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

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