Magnum Fund Management's new debt fund gives investors access to a pool of notes generating double-digit returns with low correlation to any asset class.
The MG Collateralized Debt Fund, which is open to investments from USD 100,000, invests in mezzanine debt that has been negotiated and sourced by Jericho State Fund Consulting, LLC, and other third parties. Loans sourced by Jericho since January 2004, which are similar to the types of loans in which the fund will invest, have had an average annual return of 18.3 per cent.
'We've teamed up with a nationally known company -- Jericho -- that has sourced and negotiated loans of this type for the past 34 years, participating in hundreds of transactions totalling in excess of USD 1 billion,' says Dion Friedland, Magnum chairman. 'Not only have they yielded attractive returns, they have done so with a minimum of risk and volatility.'
The fund takes advantage of the need, particularly by commercial developers, to obtain financing beyond that provided by traditional banks or mortgage brokers in order to fully meet their required capital. Lenders like Jericho are able to write loans that generate between 10 per cent and 24 per cent per year, in addition to upfront points ranging from 0 to as much as 10 points.
The loans are made with stringent criteria to experienced borrowers with a verifiable track record and secured by a diversified portfolio of hard assets located in a range of geographical locations. The notes are backed by a sufficient loan-to-value ratio to cover even a significant decline in real-estate prices, and have shown impressive returns with low volatility.
Jericho is a financing company that since 1972 has specialized in a variety of funding capabilities across the United States, including real estate financing, bridge loans, mezzanine loans, accounts receivable financing/factoring, investor note financing as well as other non-traditional strategies.
Magnum, founded in 1994 by its chairman, Dion Friedland, focuses on identifying the leading hedge funds and investment opportunities throughout the world and combining them into funds of hedge funds designed to deliver targeted levels of return for given levels of risk. Since 1996 Magnum has also worked closely with many leading investment professionals in assisting them to establish hedge funds and has sponsored hedge funds managed by some of the leading hedge fund managers in the world.
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