Metrics Real Estate Income Fund: broadening access to a wider range of investors

Amid strong demand for private credit, there is an understandable desire from providers to give the people what they want.

But for Metrics Credit Partners Managing Partner, Andrew Lockhart, there are higher priorities than simply bringing product to market.

"We are focused on protecting and preserving investor capital while delivering sustainable income”, says Lockhart.

With Metrics the only non-back corporate lender among Australia’s top 20 corporate lenders overall, such scale affords Metrics the ability to keep to its focus as well as provide new opportunities for investors.

The newly minted Metrics Real Estate Income Fund aims to widen access to retail investors whilst leveraging the philosophy and strategy behind the Metrics Real Estate Debt Fund – which has been around since 2017 but has only been available to wholesale and institutional investors.

With the strategy now accessible to a broader audience, I sat down with Lockhart to revisit the investment philosophy and the features, benefits, and risks of the new vehicle.

A defensive alternative in private credit

Private credit has become an increasingly attractive asset class, particularly in the real estate sector, where traditional funding sources are shifting. Lockhart describes the Metrics Real Estate Income Fund as a “defensive alternative to traditional fixed income,” highlighting its focus on senior secured loans backed by real estate assets.

"You sit at the senior part of the capital structure, you're secured, and there are covenants imposed on the borrower," Lockhart explains.

These covenants, which include leverage limits and interest cover ratios, ensure a disciplined approach to risk. Furthermore, the average loan-to-valuation ratio (LVR) of less than 65% lessons the risk to investor capital even in market downturns.

With over 120 positions and a fund size approaching $4 billion, the underlying Metrics Real Estate Debt Fund provides diversification across residential, industrial, and hotel investments. The short-duration nature of the portfolio (maturities of less than 12 months) also allows for active risk management and flexibility.

Scaling up through direct origination

According to Lockhart, one of Metrics' key advantages is its direct origination capability, which allows it to source high-quality lending opportunities rather than relying on secondary market transactions.

"We’ve invested substantially in direct origination capability. We want people with strong skill sets, relationships, and networks in the market," Lockhart says.

This strategy positions Metrics as a relevant and trusted financing partner for sophisticated borrowers according to Lockhart, who adds that “being large in scale allows us to be relevant to larger, more sophisticated borrowers”.

By maintaining strong client relationships and offering customised financing solutions, Metrics ensures a steady pipeline of high-quality investments.

Managing risk in a growing market

With private credit continuing to expand, regulatory scrutiny is increasing. Metrics has been proactive in implementing rigorous risk management practices to safeguard investor capital.

"Our business is built around risk management - who we do business with, the reputation risk, and the capital structure risks we are exposed to with any individual borrower," Lockhart explains.

Metrics employs a team of over 170 professionals, including legal, financial, and due diligence specialists, to assess and monitor each transaction.

Unlike public markets, private credit offers access to detailed, confidential borrower information, allowing for ongoing risk assessment.

"It's not like we’re just waiting for the half-year report to come out on an ASX-listed company. We have intimate knowledge of the business or project and access to real-time information," Lockhart notes.

If issues arise, Metrics takes proactive steps to mitigate risk. "If a borrower faces challenges, we work with them to come up with solutions - whether that’s additional equity injection, asset sales, or restructuring," he says.

In cases where more decisive action is needed, the team has the expertise to manage workouts or restructures efficiently, lessoning the risk to investor capital.

Investment returns and accessibility

The Metrics Real Estate Income Fund is designed to deliver a total return of the RBA cash rate plus 400 basis points, with monthly income distributions(2). The fund structure allows retail and high-net-worth investors to access the underlying real estate debt portfolio, benefiting from its proven track record(3).

Lockhart highlights the importance of this accessibility: 

"Since 2017, we’ve demonstrated a proven track record with a well-diversified, scalable fund. Now is the right time to broaden access to a wider range of investors."

An alternative way to invest in real estate.

The Metrics Real Estate Income Fund (the Fund) offers investors a pathway into Australia’s diverse commercial real estate (CRE) loan market. For further information, please click here.