Lock in profits outside of the current mayhem
As a follow up to my last couple of articles regarding what specific steps you can take to protect your investments so you can prevent them from being burned to cinders in a blazing surge of panic stock selling, I’d like to return to the topic of Private Finance Investments.
In these difficult market conditions it is important that as IFA advisers we continually scour the market for new financial solutions, directions and possible opportunities for our clients. A soon to be launched fund from CF Arch Cru seems in my mind a wise fit in that sense. Modelled on a current, very successful fund aimed at institutional investors, Arch Cru have responded to calls from many IFAs to launch something similar to private investors.
This fund is designed to have extremely low volatility whilst at the same time providing positive (in the current climate, their profile actually looks very impressive) returns. The existing fund has returned over 25% since February 2007, in markets that have seen unprecedented volatility, banking failures and global financial pandemonium.
That’s correct – the money is still there, the credit crunch has not affected those 25% profits one iota.
Even with the UK Government’s quasi-nationalised bank bailout for RBS, Lloyds TSB and HBOS there’s no guarantee that things will stabilise any time soon – in fact as I speak I notice that shares in all these banks are down as they closed today and that’s after a £37bn injection of cold hard cash.
It may be that the European leaders announcement of a Europe wide rescue scheme for their beleaguered banks of £393bn today, may help stabilise things and get nerves settled somewhat, but as we all know – fear is easily spread and it’s the panic which does the most damage most quickly.
Hence we have a very good reason to step away from this volatile system to explore some of the benefits and opportunities of private finance investing. In my opinion one of the very best, most well run operations who’ve proven their expertise again and again despite financial pressures elsewhere are CF Arch Cru.
A Fund For Now
This is obviously a good time to launch a fund of this nature. The credit crunch means many existing lenders are starved of cash. Arch Cru are cash rich which means that they can access some of the best deals charging higher interest rates to borrowers, meaning better potential returns to our investors. The short term investment climate for private finance is outstanding.
Private Finance Explained
Private finance allows investors to participate in a very wide range of lending opportunities which offer the potential for high returns, low volatility and virtually no correlation to public markets such as corporate bonds or fixed interest. The Finance Fund will hold a very diverse selection of private finance deals, providing for diversification for investors.
Private finance is an alternative source of borrowing to mainstream banks and is sought for many reasons. A company may need to finance the purchase of stock or fund a temporary need for cash while awaiting payment for goods or services already delivered. Whilst banks can be cheaper they often take a long time to process deals and speed of service can often justify paying a higher rate of interest. Private finance experts, such as Arch, have an experienced team who have a very good understanding of the businesses they are lending too which often gives them an advantage over mass market lenders.
Any examples of Private Finance Investing?
A golf bag manufacturer has a major order from a supermarket chain. They need to buy in materials, but existing cash flow is insufficient. Given that the gross profit margin is 30%, they are more than happy to pay a rate of base rate plus 6% as they only need to borrow for 6 months to complete the order. The supermarket have set the delivery date and finance is not possible to be in place if they turn to their usual lender, their bank.
So the company turns to private finance as a deal can be put in place in a week, secured on the golf bag materials before delivery, accounts receivable after delivery and other assets (such a the factory or the company itself, personal guarantees etc) to ensure the lender is substantially over secured i.e. if the company defaults there is more assets available than the outstanding loan.
Demand from the corporate sector has not diminished, so with cash to lend the CF Arch Cru Finance Fund is, we believe, extremely well placed to secure the best deals in terms of security and interest rate.
If you require more info on this fund or any other please get in touch on 0800 321 3508. Please remember past performance is not necessarily a guide to the future performance but I certainly do rate CF Arch Cru as among the very best of my portfolio recommendations.
Until next time, take care…
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