Following 18 months of operation Paxton Private Finance is seeking to expand the fund, which generates returns from the arrangement, interest and exit fees payable by borrowers.
It targets an interest rate of 1.75 per cent for its borrowers, from which it expects to provide a return between 8 per cent and 11 per cent for investors. To date it has achieved an average monthly interest rate of 1.84 per cent.
‘The Paxton Secured Income Fund provides investors with access to an attractive investment opportunity in the UK property market via funding for short-term asset-backed lending,’ explained Nick McLean, a partner at Paxton Private Finance. ‘We initially soft launched the fund in April 2011, and we feel that now is the time to increase our funding levels by up to £10 million to meet proven demand in this specialist sector.’
‘With an increasing number of people looking to use short-term funding in the UK property market,’ added David Kinane, another partner at Paxton, ‘it holds significant potential for investment returns. However, these need to be carefully managed and the Paxton Secured Income Fund provides investors with the ability to take advantage of these opportunities confident in the knowledge that strict risk management criteria are in place.’
These criteria include a limit per borrower of 15 per cent of the overall fund value or £750,000 if that is higher, a maximum loan term of six months, and a maximum loan to value of 75 per cent. McLean and Kinane have confirmed that there have been no defaults on loans so far, and only around a third of applications are approved.
The fund provides quarterly income, with the option to withdraw the investment after an initial period of 12 months.
Paxton was formed in 2010, and the fund is structured as an unregulated collective investment scheme (UCIS). It has provided a little over £6 million in bridge loans since its debut.