Why are we only investing in 1st mortgage loans at this point in the credit cycle?

Given the current market dynamics, including higher inflation and rising interest rates, we are always mindful of slower than expected economic growth and the potential for a recession in the short to medium term. To protect our investments, we are therefore always positioning our loan portfolios for a potential fall in asset prices.

1st mortgage loans that rank first in the capital structure, provide the greatest buffer against a fall in asset valuations.

1st mortgage loans also provide our investors with a strategy that focuses on capital preservation and stable investment returns. This is particularly the case in comparison to corporate loans, mezzanine finance, 2nd mortgage loans and preferred equity loans which are subordinated in the capital structure and will be at a greater risk of impairment.

Given the return for the lowest level of risk available in the capital structure and in considering the current economic environment, we therefore believe the most attractive risk adjusted returns in private credit are currently available through senior secured (1st mortgage) loans that rank first in the capital structure.