Katch has been highlighting the benefit of adding alternative assets to build resilient portfolios since its creation more than 5 years ago. Aggressive monetary policies since the Great Financial Crisis have inflated traditional asset classes. The stagflation environment in 2022 showed that Equities and Fixed Income can be highly correlated sometimes, with losses in tandem (more than -15% for both asset classes). It was a good lesson for private bankers that diversification and adding alternative assets to client portfolios are becoming imperative, and not only for the large and sophisticated ones.
Nowadays, most bankers would probably agree with the benefit of alternative investments. However, they might struggle to select the most suitable products for their client base.
We recommend taking into consideration the following 6 most important characteristics:
- Downside protection
- Dividend distribution
- Uncorrelated behavior
There are not many strategies that can combine these characteristics. For instance, private equity is a great asset but has absolutely no liquidity as you need to be invested usually for a period of 5 years or more. The hedge fund industry also presents some great features but most of the time it does not offer any transparency on the underlying strategy and position. Gold is also an interesting solution, but it is not uncorrelated to traditional asset classes as we saw this year with this asset also having a negative return of -8%.
We believe that short-term private debt could be a great solution for investors that are starting to look at the alternative space. The Katch Global Lending Opportunity Fund scores strongly on the 6 requirements described above. We offer liquidity as the notice period is only 45 days and then we offer monthly redemptions. We also provide transparency as our investors get access to all our positions in our quarterly portfolio report. Also, all the strategies are managed in-house with our 40 employees located in London or Sao Paulo. The downside protection comes from the fact that most of our loans have real estate in collateral and we use very conservative loan-to-value ratios when underwriting loans. The portfolio is also very well diversified with exposure to 3 main short-term lending strategies such as receivables, real estate bridge loans and opportunistic direct lending. Moreover, we are also exposed to more than 8 developed countries, mostly in continental Europe.
All our strategies were up at least 5% in 2022 and this is a strong contrast with traditional markets and a real example of the uncorrelation of our solution.
Finally, for investors looking for yield distribution, our fund offers a dividend of 6% p.a. which is paid on a quarterly basis.
Therefore, with more than 4 years of track record and AUMs of $200mns, the Katch Global Lending Opportunity Fund is an attractive solution for private bankers whose clients wish to get conservative exposure to uncorrelated alternatives.
Disclaimer: The Katch Funds are solely reserved to professional and qualified investors as per MiFid II. Past performance should not in any circumstances be taken as an indication of future performance. The value of the money invested in the fund can increase or decrease, as a result of currency fluctuation and there is no guarantee that all of your invested capital can be redeemed. Investors and prospective investors should refer to the official documents of the Fund, including the Private Placement Memorandum, for further information about the risk of investing in this investment fund.