Second-charge mortgage lender Equifinance has launched an investment vehicle offering high net worth and sophisticated investors exposure to the secured loans market.
Promising an annual income return of 10 per cent, the six-year Equifinance Loan fund will distribute income to investors on a quarterly basis.
The fund – structured as a UK limited partnership – aims to capitalise on a liquidity shortage in the secured loan market, providing funding to Equifinance who will lend the money to qualifying borrowers at a premium rate of interest.
Loans are secured against a residential property as a second charge mortgage, with Equifinance to make loans of up to £20,000.
The minimum holding in the closed-end investment vehicle is £10,000, with equity to be returned at the end of the six-year life of the fund. The fund will invest in loan notes issued by Equifinance and hopes to raise £5m.
Head of investor relations Mike Healy says: “With continuing poor yields investors are losing out to inflation. Equifinance Loan Fund provides an attractive return from a wholly transparent source.”
The lender expects establishment costs of 2.1 per cent of the £5m target equity with annual costs of 1.1 per cent of the target. There are also termination costs of 1 per cent of the sales proceeds, which includes legal and professional fees.