Accredited investor looking for a private equity fund that pays interest income should review what Regent Global Funds LLC (“RGF”) has to offer. RGF operates like a private bank or lending institution by using investment money from investors, hedge funds, pension funds; their own banking credit lines, the fund managers’ personal money and distributing it over a diversified loan portfolio.

“Many of the transactions financed by RGF involve properties, timelines, and/or circumstances which fall outside the guidelines of traditional bank financing. RGF is able to provide creative solutions without conventional constraints using a wide array of debt instruments including: commercial 1st & 2nd mortgages, residential investment 1st & 2nd mortgages, mezzanine loans, developer bridge financing, and short-term cross-collateralized financing.”

It is an asset backed investment that has been paying its investors an average of 10% annually in the form of interest income. A return higher than 10% is possible depending on negotiated interest rates with the borrowers. In certain cases, if a borrower defaults on the loan, an investor may actually receive higher returns from the “defaulted” interest and/or a foreclosure sale of the collateralized property.

There are no management fees or hidden costs and RGF does not use investor dollars for their day to day operating costs. The investor’s money is used only to fund loans in a loan pool.

Here are some additional Q&A’s from their website.

Is this safe?
Risk perception and risk tolerance need to be taken into consideration on an individual basis to answer this. A risk assessment by the investor should always be done with his or her investment advisor whenever considering any type of investment. Many investment advisors will agree that diversification is one of the most important variables when considering a safe investment plan. Depending on the individual’s investment portfolio, investing in a fund like RGF may be a diversification from typical investment vehicles. In addition, the fund itself is diversified. The following is a more in depth look at this:

1. Diversification within the fund – With each participant investing in each of the loans in the fund, any potential losses are spread over a large pool so their overall impact on an individual investor is mitigated. The diversity of the fund mitigates an investors risk in the same way that a mutual fund mitigates risk by investing in many different stocks. Rather than relying on one loan to perform, the investor relies on a pool of loans for overall performance.

2. Asset backed – Unlike stocks, bonds, and mutual funds, RGF is offering a participation in a loan portfolio that is backed by real property. In addition, it is important to point out that RGF is not loaning out at high LTV’s. RGF is only interested in properties with considerable equity.

3. Contrary to a security – The fund is private and shielded from fluctuations in principal due to financial market perceptions. What this means is that because RGF is not traded publicly, the value of an investor’s principal is not exposed to the fluctuations experienced in a stock, bond, or mutual fund. Arguably, investments paying dividends are currently taxed at a lower rate than the interest income to be earned by RGF’s participating investors. However, the fluctuations in stock, bond, or mutual fund prices that an investor is exposed to in publicly traded securities creates the potential risk of a loss of forecasted returns and principal. Risk of loss on a security is based in part on the market’s perception from time to time of what a security’s value is, be it right or wrong. Securities are also subject to fluctuations influenced by analysts, the media, and mass sell-offs from mutual funds. RGF is not.

4. Personal investment by Fund Managers – RGF’s managers have a personal investment in each and every loan as per the guidelines set out in their offering memorandum. In short, the managers only realize returns when the participating investors are realizing returns. This is vastly different than almost any other type of managed investment.

What happens in a down market?
RGF’s business should thrive in the current and future cycles. In higher interest rate cycles, the access and availability of money is tighter, and if mortgage rates increase it will get even tighter. Borrowers will find that they are not receiving approval for loans that fall below the LTV thresholds, or that the higher interest rates increase the payments and the cash flow analysis won’t pass the bank’s requirements. If interest rates decrease, then the need for bridge or mezzanine financing will be even higher among developers and investors.

What can go wrong?
RGF analyzing a situation incorrectly. However, we have a model, we have a process, and the availability of the opportunities is much greater than the funds that RGF has at its disposal. Because of this, RGF will be able to pick and choose the loans that we fund very conservatively. The health of the fund is more about the loans we don’t do rather than the loans we actually do.

Can RGF take in money from an IRA?
Yes, we have just been approved by Charles Schwab’s alternative investment unit to take in IRA money. Charles Schwab is only one broker; although the litmus test for this type of investment should be somewhat standard across the board.

Can I get my principal back at anytime?
No. Currently the liquidity of the fund is based on a commitment from an investor for at least 1 year. RGF is allowed to make capital calls all the way up until December 2007 as per the Subscription Agreement. After a call is made, the funds raised from the capital call will be put into a loan that will typically last anywhere between 4-18 months. This is the reason why RGF is only allowing accredited investors with sufficient funds which are not needed by the investor for the next 4-18 months.

Is this considered a long or short term investment?
The fund can be both a long-term or short-term investment and it’s completely up to the individual. In the short-term, participating investors will earn steady, high yielding interest-income. In the long-term they can choose to keep their money committed and earn steady interest income for as long as they like. In addition, participating investors will possibly have the first opportunity to own shares of a real estate portfolio as RGF acquires properties.
These high cap rate properties should provide long-term returns as well.

When will I get paid and how?
RGF pays its participating investors by check each calendar quarter regardless of when a call and/or loan was initiated.

Contact Information:

446 N. Wells Street, Suite 138
Chicago, IL 60610-4583

Chicago 312.242.3641
Toronto 888.295.8344
Fax 866.881.0224

Email: information@rgfunds.com

Thank you for reading this post. You can now Leave A Comment (0) or Leave A Trackback.