A little under two years ago, we made a change in our business that had MASSIVE ramifications for our investors.
In our industry, one common problem for any operator is forecasting accurate investor returns and alignment of interest. While there is an inherent risk with any investment made, all investors that place their trust in others for the management of their investment hope that the management is sound, and their forecast return is met or exceeded.
And therein lies the challenge for any fund manager (and investor).
Investing is not risk-free, but comes with many variables that play a role in the success of an investment and the resultant returns.
As an investor myself (many in our team are also avid investors), I am always looking for ways to reduce risk and achieve greater certainty. While I may have a greater appetite for risk than others, I remain a conventional investor that likes to maintain a large percentage of my investments in conservative risk managed opportunities.
At CFMG Capital we are an active developer with a funds management platform. However, the funds management platform was a fee based business where investors were able to invest directly into our opportunities and the return was ultimately determined by our performance as the Manager and of course other market forces. However, where the problem lay was that our fee was earnt regardless of whether the forecast return was met, exceeded or even where we fell short. SO in short, our interests were not as closely aligned to investors as we would have liked.
To counter this issue, in 2016 we launched the CFMG Land & Opportunity Fund. Through this fund, we help our investors access a 12% annual fixed return. The market-first CFMG Land & Opportunity Fund invests in the development of residential land subdivisions that are near major capital cities, infrastructure and jobs – and that benefit from population growth.
The CFMG Land & Opportunity Fund is a game-changer because unlike other residential property, land syndication or mortgage-backed securities funds, the fund’s return is contractually guaranteed and to align the interests of CFMG Capital directly with those of investors, we don’t earn any fees or profits until that contractual obligation of 12% per annum is met.
The CFMG Land & Opportunity Fund has several benefits.
By providing a fixed return, the fund offers greater certainty for investors. Competing products typically promote a forecast return based on the issuer’s assumptions, thus adding risk for investors. We know this, we used to do the same.
The fund’s duration further enhances certainty. Investors receive the return on their investment on a fixed maturity date - typically after 18 to 36 months. In contrast, returns on direct property investment can be volatile and take longer to achieve.
The fund provides direct exposure to Australia’s most popular investment asset class, residential property – however, you are able to gain this exposure without the need for leveraged debt or the risk overweighting your investment portfolio to a single asset or asset class.
The CFMG Land & Opportunity Fund’s 12% per annum return (net of fees) is attractive compared to other asset classes.
Residential investment property returned 8.1% annually over the 10 years to December 2016, the 2017 ASX/Russell Investments Long-Term Investing Report shows.
Australian shares returned 4.3% annually over this period, Australian listed property had a zero return and cash returned 2.8%.
Diversification is another benefit of considering an investment with the CFMG Land & Opportunity Fund. An investment into direct residential property is typically exposed to one asset.
To find out a bit more about CFMG Capital and how the CFMG Land & Opportunity Fund may be a good fit for your circumstances schedule a call back with one of our Investment Consultants.