March 2021 Monthly Report

Capspace Private Lending Fund

Strong consistent returns generated from a well-managed portfolio

Every month the Directors review our SME loan portfolio in detail to protect all of our investments. Our portfolio remains in order with all loans performing as documented. The Loan to Value Ratio (LVR) changed marginally to finish at 46% in March. This movement was driven by rebalancing of the portfolio given a number of borrowers repaid their loans.

The Reserve Bank of Australia (RBA) official cash rate remains at 0.10%, a record low. Recent RBA statements support the maintenance of this low interest rate environment for the foreseeable future.

By supporting SME businesses, Capspace at an 8% per annum yield, is paying over 20 times the interest rate of current major bank 12-month term deposits, with the interest paid monthly into your account.

It’s All About Property – Again!

With the RBA cash rate stuck at 0.10% for the forseeable future, the spotlight is once again on the residential property market. The major banks and other industry commentators are predicting price rises of up to 20% in the Sydney market during 2021.

Across our portfolio we have seen demand improve significantly for our customers selling residential developments. This led to increased loan paybacks during the month of March, providing us with the opportunity to support more SME borrowers.

Financial markets are starting to factor in higher long term interest rates, with 10-year bond yields in Australia stabilising in March at 1.80% (up from 0.90% in February). We expect Fixed Rate Loans to increase in price in the coming months, reflecting the changes in the bond market.

commercial loans

JobKeeper Ends

The Federal Government’s job support payments ended on Sunday 28 March 2021. At one stage during the pandemic JobKeeper supported more than 3.5 million workers across 900,000 businesses with the expected cost of the entire program to exceed $100 billion.

Many SMEs relied on JobKeeper and there are reports that 150,000 workers will become unemployed at the conclusion of the scheme. None of the SMEs supported by the Capspace Private Lending Fund are currently reliant on JobKeeper. However, we will watch with interest the impact on the broader economy of the end of these wage subsidy payments.

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If you would like to increase your exposure to Australia’s growing SMEs or recommend us to others in your network, we are always available to discuss new opportunities.