In response to market trends and growing demand for development finance, bridging lender Montello has just launched its second UCIS fund, the Montello Development Finance Fund. Montello’s Managing Director, Christian Faes, explains more…

 

 

CF: We decided to launch the new Development Finance Fund because a number of our investors were keen to go slightly up the risk curve with their investment with us. We have built a solid track record with our investors over the last four years and some were keen to have another Montello product to invest in.

 

On the lending side, a number of our borrowers are professional property developers so we have a ready pipe-line of deals to lend against. These borrowers are keen to lend from this new funding facility.

 

 

Not really. We pride ourselves on being relatively small and nimble, and as such we are able to move with market trends. In this instance we had the investors ready to seed the fund and a pipeline of deal-flow, so it was a fairly straightforward decision. It was not necessarily part of some larger scheme for the business.

 

 

The new fund is more targeted towards lending to property developments, and property developers. It allows us to do some second charge lending, where it makes sense. The risk profile for the Montello Income Fund is very conservative, and only lends on a first charge basis, primarily against London residential property.

 

 

Both of our funds pay a fixed coupon so investors in the Montello Income Fund receive 8.5 per cent per annum, while investors in the Montello Development Finance fund receive a return of 10 per cent per annum. However, investors in the Development Fund are required to commit their capital for a minimum of two years.

 

 

It was signed off for launch late last year.

 

 

Both of our funds are Unregulated Collective Investment Schemes (UCIS), with an FSA-authorised third party operator for the funds. The UCIS model is not ideal; however unfortunately, there is no alternative fund structure available in the UK for a fund that invests in ‘loans’.

 

 

We don’t really have a firm investment target for the Development Fund. I think we will look to take investments up to about £10 million, and then assess the opportunity further. We would prefer to run a small fund well and be in business for a long time – and build our reputation with investors – rather than run a large fund poorly for a short period of time (as we have seen with some other funds).