First it was the pandemic, then rising interest rates that battered listed property trusts. For those who might be tempted to get back into this market, their investment shopping list should include five key factors before taking the plunge.
With EY predicting a pick-up in the private credit market, the need to understand the risks inherent in this investment strategy that’s nearing $200 billion in assets under management has never been more important.
Experienced property fund manager joins Trilogy’s ranks
When Laurence Parisi (pictured) was recently offered the role of Fund Manager – Trilogy Industrial Property Trust, at the Brisbane-based Trilogy Funds, it wasn’t a difficult decision to make.
Having met Trilogy’s executive directors a few years earlier, Parisi got a first-hand introduction to the team and its approach to business.
Parisi says: “What struck me initially was their humility, industry knowledge, commitment and focus. As someone who has been in the property business for more than two decades, on both the sell and buy side, in listed and unlisted vehicles and global investment banks, it was refreshing.
“At this point of my career, a big driver for me is wanting to be part of a dynamic team with growth aspirations, and Trilogy certainly ticks all those boxes.”
He says it’s little wonder that Trilogy – it has been a fund manager and financier of property-based investments for 25 years – has been able to build a successful business through several property cycles.
“In my opinion, there is significant trust in the brand that ultimately makes the task of creating and managing investment products easier.”
He adds that the group invests in people and systems, critical for a financial services business. “In previous roles, whether as an analyst, portfolio manager, COO or CEO, that investment in technology has been missing, to a greater or lesser degree, so I appreciate the importance of having the right systems in place to grow a business.
“It’s not just having the right systems. This group knows and understands how to invest in the right areas of the business to facilitate strong growth.”
Trilogy has a long track record of creating income-focussed direct real estate products for investors, currently managing more than $330 million in direct real estate.
In his role, Parisi says he aims to use his extensive experience with listed and unlisted property funds to build on that foundation, not only to grow the existing funds under management but to broaden the product offering with innovative property-backed investments.
What will assist him achieve these goals are the investment tailwinds property-backed private credit funds are enjoying.
For Parisi, that’s not surprising, arguing that retail, wholesale and institutional investors have all been attracted to this asset class for the past decade.
He says: “Private credit has been consistently delivering relatively high levels of income, offers good security over tangible assets, a high degree of transparency from borrowers and is easily diversifiable by sub-sector and geography.
“Australian real estate is a compelling place to invest as the fundamentals remain robust and private credit offers attractive risk-return attributes. I believe private credit has a definite position in a diversified portfolio.”
That said, he adds that any asset has potential risks that investors need to be aware of and undertake the necessary due diligence. In this respect, private credit is no different, irrespective of the levels of security underpinning the assets that are on offer.
“It all comes back to experience, brand, trust and longevity in the market. As always, there are a growing number of new entrants in the market and investors should be aware of who they are investing with and whether they have the appropriate experience, track record, risk measure policies and reporting systems.
“There has been a large amount of capital allocated to this sector and I often question the diligence some managers undertake in their haste to get the capital working. It’s important for investors to understand where they sit in the capital stack, and how much security is behind their investment,” Parisi concludes.
