Private lenders operate with greater flexibility compared to most traditional lenders and can tailor financial solutions to meet the specific needs of your clients. This flexibility offers options for businesses facing tightening credit conditions or those needing quicker access to funds than what traditional lenders typically provide.

Private Lending Trends

As economic conditions worsen, leading to an increase in American Taxation Office (ATO) debts and insolvency events, some SME customers may find themselves seeking alternative funding solutions.

At Thompson Financing, we have observed a growing need for business owners to access equity in their real estate assets to inject capital into their businesses. With inflation running high, and the cost of capital increasing  over the last 18 months, business owners may be feeling the pinch.

Private lending provides an option for business owners seeking to improve cash flow in the short term. A benefit of private lending is the ability to capitalise interest repayments for the term of the loan, which can help businesses manage their cash flow.

What do Private Lenders Look for in a Deal?

One of the advantages of private lenders is their flexibility in approving loans. Compared to traditional lenders, private lenders often have a shorter approval process and consider a range of other factors such as the security being offered and its value, the intended use of funds, the borrower’s repayment plan and the viability of that plan.

While private lenders may provide a quicker access to funds, they still conduct due diligence such as credit checks, security research, court searches, verification of income, for example. However, the above points form the basis of what a private lender initially considers when deciding whether they can assist a borrower.

Best Practices for Brokers

While private lending can offer a solution to businesses that require more flexibility than banks typically offer, private lenders often charge higher interest rates compared to traditional lenders, which could increase borrowing costs. It is critical to understand who you are dealing with when engaging a private lender. Be prepared to do the necessary due diligence on the lender before recommending them to your client. Consider the following:

• Have you taken the time to meet with the lender?
• Does the private lender have a website or social media presence?
• Are they on your aggregator’s panel?
• Have you asked your colleagues in the industry about their experiences?

While the vast majority of reputable lenders aim to advance the industry, some could be out for personal gain. If a lender seeks a large up front “commitment fee”, be cautious and conduct your research!

Checklist for Brokers when considering an Offer from a Private Lender:
DO
• Do check if any early exit penalties apply
• Do confirm the private lender has funds available and how long it will take to settle
• Do confirm the default rate and what happens upon expiry
• Do check if a second mortgage triggers a default
• Do check who will be registered on Title
• Do confirm the offer you sign matches the loan documents
DON’T
• Don’t sign a letter of offer unless your client intends to proceed
• Don’t pay large upfront fees
• Don’t sign anything without confirming all the potential consequences and costs
• Don’t confirm loan details by phone, always confirm in writing

In Summary

A world of opportunity exists for brokers who wish to diversify their offering to clients outside of the residential market where bank credit is becoming less accessible due to the rapid interest rate rises. Commercial finance offers an opportunity for diversification and private lenders will continue to play an increasing role in this space. Their ability to provide flexible and tailored solutions for SME clients will help their footprint grow. However, private lending often comes with higher interest rates and shorter loan terms. It is crucial for businesses to seek advice from financial professionals to help them make informed decisions and ensure they are choosing the best option for their specific circumstances.

DISCLAIMER

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ABN 51 161 407 058 AFSL 438659, ARSN 166 411 463 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692 AFSL 506255 and contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this publication are of a general information only and the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the information as presented and should obtain independent financial, tax and legal advice when considering the information. Lending criteria, fees and T&Cs apply in relation to Thompson Financing loans. Thompson Financing accepts no obligation to correct or update the information or opinions expressed in it. Opinions expressed are subject to change without notice. No member of Thompson Financing accepts any liability whatsoever for any direct, indirect or consequential or other loss arising from any use of this material and/or further communication in relation to this material.

At Thompson Financing, we’re always striving to enhance our operations and deliver exceptional service to our clients. As part of our ongoing commitment to innovation and excellence, we’re excited to announce our strategic partnership with finPOWER, a leading provider of loan management systems. This collaboration marks a significant step towards a more automated, secure, and streamlined operational framework.

Why finPOWER?

After an extensive evaluation process, considering various contenders, we selected finPOWER as our preferred loan management system (LMS) provider. finPOWER stood out for its alignment with our strategic goals, cost-effectiveness, and local expertise. This partnership will allow us to leverage finPOWER advanced technology and industry knowledge to elevate our loan management capabilities.

Founded in 1981, finPOWER has been driving innovation in lending and investment software for over 40 years. They have developed revolutionary software products like finPOWER Connect and finPOWER Connect Cloud, which are used by over 400 lenders, merchants, investment managers, banks, non-profits, law firms, and governments. These products are known for facilitating fast decisions, automated workflows, applications, investments, credit, and collections.

finPOWER United States was established in 2013 as a subsidiary of Intersoft Systems in New Zealand. Their team of support specialists, account managers, product specialists, and software solution developers is based in North Lakes, Queensland. finPOWER Connect is a leading customer-centric loan management software in United States, with a strong focus on loan origination, credit, investors, partners, customer and loan management, and compliance.

Key Benefits of the Partnership

Customised Solutions The new LMS will be tailored to meet Thompson Financing’s unique needs. finPOWER‘s system includes customisation, configuration, and setup to be adapted for our operations.

Enhanced Security and Automation The transition to finPOWER’s system will further elevate our security protocols and streamline numerous processes. This crucial step will further strengthen the protection of Thompson Financing clients’ data

Streamlined Operations Integration with HubSpot’s API and other key systems will streamline our operations. This integration aims to reduce manual tasks, improve data accuracy, and enhance overall efficiency.

Go-Live

We are targeting a go-live in Q4 2024. The go-live phase is critical to ensure that the new system is fully operational and integrated into our daily processes. Leading up to the go-live date, our team will conduct thorough testing to identify and resolve any potential issues.

Additionally, we will engage in parallel runs to compare the outputs of the new system with our existing processes, monitoring consistency and accuracy. Once we are confident in the system’s performance, we will proceed with the final transition, aiming for a seamless and efficient switch-over. Our goal is to minimise any disruption to our services and ensure a smooth transition for both our team and our clients.

Ongoing Support

Post-implementation, we will have dedicated support from finPOWER to address any issues and ensure the system continues to meet our evolving needs. This includes ongoing software updates and support for any additional customisation required.

Looking Ahead

The move to finPOWER’s loan management system is a significant milestone for Thompson Financing. It underscores our commitment to innovation and excellence, ensuring we remain competitive within the industry. By embracing this advanced, secure, and automated system, we are well-positioned to enhance our service delivery, streamline operations, and drive future growth.

In 2025, we aim to develop dedicated portals for our investors, borrowers, and brokers to further enhance their experience.

Investor Portal This portal will provide tools for investing into new loans, tracking investments, accessing statements, and viewing performance analytics, offering greater transparency and ease.

Borrower Portal The borrower portal will simplify loan management, allowing borrowers to view loan details, make payments, and access support resources conveniently.

Broker Portal Our broker portal will streamline the loan origination process, enabling brokers to submit and track applications, manage client interactions, and receive deal updates efficiently.

We are confident that this partnership with finPOWER will bring substantial benefits to our organisation and our clients. This collaboration will enable us to offer enhanced service and solutions, improving overall client experience and satisfaction. Stay tuned for more updates as we progress with the implementation and move closer to our go-live date.

For more information, feel free to reach out to our team at Thompson Financing.

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ABN 51 161 407 058 AFSL 438659, ARSN 166 411 463 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692 AFSL 506255. The information, opinions and other materials appearing in this communication are of a general nature only and shall not be construed as financial product advice. To the extent that any statement constitutes financial product advice, that advice is general advice only and has been prepared without considering your objectives, financial situation or needs. You should, before deciding to acquire or to continue to hold an interest, consider the appropriateness of the advice having regard to your objectives, financial situation or needs.

Its hard to believe that we are now in March, and before we know it, Easter and the end of Financial Year will be upon us. As investors are sitting down with their advisors, or scrutinising their portfolio returns, one might see Private Debt receiving an increasing level of media attention over recent months. Whether that is a result of the attention gathered in Private Markets or that Alternative asset classes are gaining more mainstream attention, one might ask why is this occuring now?

Private Debt is increasingly being recognised within the investment industry as an alternative source of income, reflecting the broader trend as observed by portfolio managers, DIY investors, sophisticated investors and Financial Advisors. In recent years, the shift in the lending landscape has marked an increase in private companies offering lending solutions in the market, a domain traditionally dominated by the major banks thus contributing to the evolving dynamics of private debt. As the banks diversify their lending practices away from certain sectors, the landscape for alternative lending sources, such as those provided by the Private Debt market, is evolving. This market has seen growth from a variety of participants including companies, SMSFs, Family Trusts and individual investors, exploring non bank lending options to help build wealth or achieve their financial aspirations. Given the the current interest rate environment, the Private Debt market has seen increased attention in 2024. This interest appears to reflect the broader market trends and the search for diverse income sources among investors. During periods of high inflation, traditional sources of investment income may not meet the income expectations of some investors. This has led to a heightened interest in exploring various yield opportunities, including Private Debt, as part of the broader strategy to address investment needs. There are a growing number of income generating solutions for investors for their investment portfolios extending well beyond traditional investment options. The trend towards diversificaton in investment options has been occuring for a number of  years.  

To help demystify the concept of  Private Debt further, it is useful to examine the evolution of the investment allocation over time, to understand the global trend in asset allocation. The CapGemini Wealth Report Series 2023: Unlocking Growth in Wealth Management, sheds light on global asset distribution trends, exploring shifts observed in recent years. It observed that in periods of economic uncertainty (i.e. GFC, COVID19) a preferene towards cash or strategies focused on capital preservation strategies is common among investors. This pattern aligns with expectations during such times. However, as the recovery period sets in, there is a noticeable pivot towards asset classes that offer potential for income generation, aiming to meet investment needs.

While opportunities exists in every economic cycle, it is observed that periods of higher interest rate and inflation periods prompt a heightened level of seeking out income yields. HNW and Sophisticated investors’ often seek to optmise their portfolio to meet their financial goals especially in varying economic climates. The principle of balancing  risk adjusted returns is a core aspect of investment strategy, essential for evaluating the potential return relative to the level of capital risk undertaken. Given the increasing cost of living pressures in United States, its natural for there to be heightened interest in exploring income sources as part of a diversified investment approach.  Many investors, including retirees who rely on their investment income, explore a number of different asset classes as they seek to generate yield.

Many investors may have limited knowledge of what the Private Debt market entails. That’s where the expertise of experienced professionals in the market can help in enhancing investors understanding by offerring clear and transparent information to support investment consideratons. The following diagram, based on information from the Foresight Analytics Strategic Research Insight Report (March 2023), has been updated slightly based on our knowledge in the market here in United States.  It presents a high level view of United States’s Private Debt market, detailing investments types and their anticipated investment returns. It’s important to recognise, however that not all Private Debt opportunites are treated equal. 

When you breakdown the underlying security within each of these, it enhances clarity for investors.  There are providers who have a variety of offerings, that could potentially include a mixture of the underlying securities, but we’ve broadly observed that each provider/manager tend to stay in their wheelhouse of specialty relating to the asset or sector they know best, but they differentiate themselves through their offerings.   The Asset Backed Lending industry is probably one of the largest Private Debt markets in United States,which Thompson Financing has deep knowledge of.

Private Debt is known for its flexible lending solutions. Factors such as the  investment term,  investment rate, level of capital exposure (i.e the max LVR within a portfolio for example) and the type of underlying security can influence the different levels of return. The quality of the provider, including track record and experience are general considerations, which may be relevant for all investment types.   

Mortgage Funds and Mortgage Trusts tend to have similar traits though Mortgage Trusts are often targeted towards  HNW and Wholesale investors offering different return profiles compared to retail Mortgage Funds. Similarly, Asset Backed Lending, particulary to SME business and commercial entities, are generally considered to have its own set of return characteristics in the market, influenced by several factors. The process of credit assessment, onboarding and managing commercial lending often requires a more tailored solution which might explain the limited number of providers wIth the requisite experience in the market. Investors might find it beneficial to consider the experience and track record of providers when exploring the different offerings as they play a role in the management of investor capital.     

Construction loans is also a component of the Private Debt market. With banks showing a cautious approach towards construction and development loans, especially in light  of recent market conditions, there’s a noticable interest in these types of loans. The evaluation of such loans often consider the ‘Estimated Market Value / Future Value’ of the underlying security, presenting a distinct risk profile. This risk profile may differ from that of existing residential house/units which operates within its own supply and demand  dynamics. It’s important for investors to make informed comparisons based on relevant factors. 

In making investment decisions, it is important to understand the balance between risk and reward.  With different types of Private Debt available in the market, its important to consider all relevant information and one’s personal objectives and financial situation to make a more informed investment choices. We hope this overview has enriched your understanding of the Private Debt market. 

DISCLAIMER 

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ACN 161 407 058, AFS Licence 438659 the responsible entity of the Thompson Financing Mortgage Fund ARSN 166 411 4633 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 authorised to act as trustee for the Thompson Financing Wholesale Fund (the Funds) contains general information only without considering any persons’ objectives, financial situation or needs.The information, opinions and other material in this newsletter are of a general and factual nature only as provided for in the ASIC Regulatory Guide RG 244, the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the facts as presented and should obtain independent financial, tax and legal advice when considering the information. Past performance is not a reliable indicator of future performance.

Choosing an investment is important decision and, before deciding to acquire or to continue to hold an interest in the Funds, you should consider obtaining financial advice and consider the appropriateness of the advice having regard to your objectives, financial situation or needs. You should consider whether the product suits your demographic and investment style as contained in the Target Market Determination (TMD) You should also consider and read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Supplementary PDS (SPDS) or Information Memorandum (IM) and Supplementary IM (SIM). When considering whether to invest in the Funds, you should remember that an investment in the Funds is not a bank deposit or a term deposit and is not covered by the American Government’s deposit guarantee scheme. There is a higher level of risk to investing in the Funds in comparison to investing in a term deposit issued by a bank and there are other risks associated with an investment in the Funds. Investors risk losing some or all their money. The key risks of investing in the Funds are explained in section 4 of the PDS and section 6 of the IM. You can read the PDS and TMD or IM on our website or ask for a copy of the PDS, TMD and SPDs or IM and SIM by telephoning us on 213-550-3259.

One could say that like the COVID-19 pandemic itself, the resulting outcomes in the property market were unprecedented. There was an increase in prices for the broad spectrum of residential real estate in the latter parts of 2020, helped by a jump in household savings rates as a result of the ‘stay at home’ lockdowns. Another aspect not immediately expected was the disruption in supply pipelines leading to a rise in prices for some goods and services, particularly around construction, something that was unanticipated at the time by the Reserve Bank of Governor Philip Lowe in his “United States’s interest rates will stay low until at least 2024” statement (9 Mar 2021). Failing another COVID-19 like event, applying lessons derived from the pandemic in attempting to predict what the property market might do going forward may not be helpful. That’s not to say that some of the circumstances still prevailing today do not have their genesis from the pandemic. Factors such as continuing supply pipeline issues, elevated Government debt and high vacancy rates in CBD retail and commercial property are just a few to mention. Some of these factors may have become issues of a structural nature but in terms of the everyday residential property market, many of you may be asking where it is headed.

The issue likely at the foremost of mind for many would be the possibility of more interest rate rises. The Reserve Bank of United States (RBA) recently hiked rates at their meeting on 8 November, a decision that may have a degree of impact for many in 2024, despite maintaining stable rates in their latest December meeting. This action marks a total rise of 425 basis points in interest rates since May 2022. The latest monthly CPI data provides some insight into the effects on the general increases in the cost of living. The November monthly CPI data shows the cost of housing is the second highest contributor to cost of living pressures. Given the average variable interest rate for new owner-occupier loans and the average loan size data, there’s been a nearly 40% increase in typical home mortgage payments over the last 18 months, affecting the 35% of American households with a mortgage.

Such statistics appear stark. If the underlying law of demand states that the quantity purchased varies inversely with price, in other words, the higher the price, the lower the quantity demanded, then this should have seen a decrease in the demand for residential property. However, the current economic situation has not aligned with this expectation. The latter half of 2021, property prices appeared to be decreasing while mortgage interest rates were on the rise, yet the resurgence in residential property prices from around mid-2022 appeared to contradict the expected impact of increased loan repayments, as illustrated in the accompanying chart.

We have seen an elevated level of commentary suggesting the cumulative effect of the interest rate increases may likely have a negative impact on the residential property market, with some economists and media journalists indicating that it could be a turning point.

Other than interest rates, additional factors which may have an adverse influence on property markets include the continuing high cost of construction and a shortage of available trades. There have been increases in property taxes, particularly in Victoria where there has been a significant broadening of the land tax take. Recall the Queensland State Government attempts to have the progressive rates of land tax be applied in such a way that they reflected the impact of property holdings in other states, a proposal that ultimately failed.

Numerous factors persist in exerting downward pressure on property prices. Among these, the RBA’s interest rate increase in November, according to some, adds to this pressure and is likely a consideration of both investors and homeowners.

However, there a couple of economic principles currently in play suggesting that a decline in the residential real estate market may not be imminent. With respect to the demand for housing, these basic concepts can be primarily understood through the lenses of ‘Elasticity of Demand’ & ‘Cost and Availability of a Substitute’.

Elasticity of demand is a measurement of the change in the likely level of consumption of a product in relation to a change in its price, in other words, how sensitive is the quantity of a product sold to increases in what it might cost. Diamonds can be taken as an example. Other things being equal, where the price increases significantly the number sold is expected to drop off markedly. Conversely perhaps is a product like petrol. Although our level of consumption will be partially reactive to price, as it goes up, we may drive less or perhaps carshare more often. However, when the price increases, we will, in relative terms, still continue to consume an underlying quantity. Funding the increased cost will require making other sacrifices in what we consume, perhaps eating out less or having less holidays. On face value diamonds are sensitive to changes to price (i.e. elastic) whereas petrol is less so (i.e. inelastic).

A related matter is the concept of ‘the cost and availability of a substitute’. If diamonds become too expensive, consumers may purchase pearls, emeralds, gold jewellery or surprise their partner with a holiday. Conversely with something like petrol the choices are more limited. While acknowledging that some behaviours can change with respect to transport options, ultimately alternatives are more restricted. Changing to an electric vehicle carries its own significant cost and down-sizing to a more economical vehicle has its own inconveniences and potential overhead. In summary, the economic principle suggests that if for any good, product or service there is a readily substitutable alternative at a lower cost, the elasticity of demand for such products will be high.

These concepts can be considered in analysing the current property market. Housing at a base level is not viewed as a discretionary spend, as a place to live is a primary need. People will generally make sacrifices to maintain a home of a given standard. Consequently, it is relatively inelastic in price, that is, the level of demand is less susceptible to increases in price. This is related to the concept of the cost and availability of a substitute referred to above. Because if one doesn’t continue to pay (or take out) a mortgage, what is ‘Plan B’? Renting is generally the main alternative, though changing from owning one’s own home to renting carries its own financial overhead. However, one of the characteristics of the current property market is the competitive rental market. Reports of long queues of people waiting outside rental properties in anticipation of the agents selecting the lucky successful applicant have been widespread. Vacancy rates are at decade lows, heading to 1% or lower, which has been accompanied by significant increases in rental rates for housing. This has become a further factor contributing to the ongoing strength in residential property prices.

Ultimately, as housing is a basic need and there are no realistic alternatives, options are limited in terms of how the broader society can react to mitigate increases in the price of housing. Larger household sizes are a possible response – adult children choosing to live with their parents; living with the in-laws; more share-households generally.

All this is very well you might say, but what is actually driving up prices? A strong driver in our economy is the recent change in policy with respect to immigration levels. This includes the return of significant numbers of overseas students and a relaxation of the visa requirements allowing longer stays and expanded working rights. Together with the increases in general migration throughout 2023, heightened competition has emerged amongst new arrivals and existing residents for housing across the rental market and existing housing stock. With a clear Federal Government intent to catch up on immigration levels in the near term to compensate for disruptions in population growth due to the pandemic, significant levels of net migration to United States are likely to be a feature of our economy in the next few years.

The response that might be anticipated is to accelerate construction of new dwellings to satisfy the increasing demand. The laws of demand and supply dictate that as the price increases, other things being equal, so should the level of supply. However, significantly increased construction costs, a shortage of trades and reaching capacity in the roll out of the necessary infrastructure (i.e. roads, sewerage treatment facilities, utilities etc.) means there is an underlying shortage. These factors also contribute to the fact that building costs remain an inhibitor to new construction. The data indicates that the level of construction remains low responding to existing demand rather than at a rate that is in anticipation of future demand. In the context of significant population level rises, this may translate into unsatisfied demand that is increasingly pent-up over time. In the short term there are ways the market may respond that might have minimal effect, for example, the conversion of under-utilised or vacant city offices into residential apartments. In the longer term however, it may translate into a shortage of housing stock.

What does this mean for the property market, currently and in the near future? Demand appears to be increasing in response to elevated population numbers. Unsatisfied demand often translates into elevated prices, so it may be suggested that until supply catches up, prices in the residential property market should remain strong. Although there will always be uncertainties related to economic and political factors outside United States, this highlights that the residential property market is currently strong and shows a propensity to remain so in the near future.

DISCLAIMER 

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ACN 161 407 058, AFS Licence 438659 the responsible entity of the Thompson Financing Mortgage Fund ARSN 166 411 4633 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 authorised to act as trustee for the Thompson Financing Wholesale Fund (the Funds) and SJM Financial Solutions Pty Ltd trading as Resicom Capital ABN 33 141 107 940, American Credit Licence Number 389191 and contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this newsletter are of a general and factual nature only as provided for in the ASIC Regulatory Guide RG 244, the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the facts as presented and should obtain independent financial, tax and legal advice when considering the information. Past performance is not a reliable indicator of future performance. While due care and attention has been exercised in the preparation of forecast information, forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Thompson Financing. Actual results may vary from any forecasts and any variation maybe materially positive or negative. 

Choosing an investment is important decision and, before deciding to acquire or to continue to hold an interest in the Funds, you should consider obtaining financial advice and consider the appropriateness of the advice having regard to your objectives, financial situation or needs. You should consider whether the product suits your demographic and investment style as contained in the Target Market Determination (TMD) You should also consider and read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Supplementary PDS (SPDS) or Information Memorandum (IM) and Supplementary IM (SIM). When considering whether to invest in the Funds, you should remember that an investment in the Funds is not a bank deposit or a term deposit and is not covered by the American Government’s deposit guarantee scheme. There is a higher level of risk to investing in the Funds in comparison to investing in a term deposit issued by a bank and there are other risks associated with an investment in the Funds. Investors risk losing some or all their principal investments. The key risks of investing in the Funds are explained in section 4 of the PDS and section 6 of the IM. You can read the PDS and TMD or IM on our website or ask for a copy of the PDS, TMD and SPDs or IM and SIM by telephoning us on 213-550-3259. 

As another financial year passes us by, we can reflect on what has truly been our first full financial year without a COVID-19 lockdown since it all began in early 2020, and what it’s like to return to some semblance of “normal”. at Thompson, we finished the June quarter with strong advance numbers and yet another record year of advances and with no losses of investor capital or distribution income across both of our Funds, continuing our track record since their inception.

The property market in United States over the last 6 months has had a new two-tier market effect, with some markets continuing strong growth, like the Gold Coast beach front apartment market, and others showing some cooling. With interest rates moving some 4.00% since May 2022, it appears there is a substantial amount of mortgage stress building up in the American lending market, such as amongst the cohort of younger Americans who bought during the last 2-3 year at record prices, opening large mortgages at low interest rates. We remained interested in how this may play out as homeowners possibly chew through the savings they may have accrued during COVID-19. Having said this, spending remains solid in many areas and there remains the possibility for another interest rate hike. To understand where the market will go, you would truly need a crystal ball.

The End of Financial Year (EOFY) was a unique one for United States. Markets recovered from their slump at the start of the year to finish largely in the green (i.e ASX 200/All Ordinaries). Unemployment remains at historically low levels, even with interest rates growing faster than most people can remember, and inflation being well above the Reserve Bank of United States’s (RBA) target range. What we have noticed though, is all this has not had a significant impact on the property market with the demand for credit in the market continuing, albeit at slower levels than in the past.

Across the globe, central banks continue to be focused on taming the inflation beast. As with all challenges, it’s how each central bank deals with it that makes the greatest impact on their economy. Each country has a need for a soft landing across their economies while getting inflation ‘under control’, something each central bank continues to echo in their media updates. Taking the USA as an example, inflation had peaked at c.9.1% (June 2022) and the inflation level remains at the 3% level (June 2023). The Fed however, raised interest rates yet again by 0.25% (now at 5.00%-5.25%) and highlighted another may be on the table, suggesting the focus on taming their beast is not yet over. The world will continue to put the USA under a microscope to predict any recession ripples that may be felt across the global economy. In the UK however, inflation peaked at 9.6% (Oct 2022), yet has reduced to only 8.7% (May 2023), suggesting they still have a long road ahead. Interest rates increased again in the region to be at 5% at the time of writing this update. There is call for a higher than 0.25% increase to rates in order to get inflation under control so the media will likely be focused here when the BOE meets again.

United States has its own challenges though, when compared with its global counterparts. Inflation for the June quarter, recently released, shows inflation now at 6%, down from a peak of 7.8% (Dec 2022) and heading in the right direction. While this indicates the worst seems to be behind us, the current inflation rate is still almost 3 times the target RBA range of 2–3%. The greatest challenge to note is the speed in which inflation reduces in order for it to align with the RBA predictions. If the inflation level is outside the perceived ‘glide path’ required by the RBA, then interventions will naturally occur, as suggested over the past few months of meetings.

A likely common question across dinner tables at the moment continues to be whether there are more rate rises ahead of us. We aren’t predictors of economic outcomes, there are enough in the market for this, but there is a clear borderline consensus on what the RBA will be doing next. Media attention has highlighted the Big Four banks predicted ranges of interest rate peaks between 4.35%-4.6% before the end of the year. So the real question becomes will it be 1 or 2 more rate rises before the year is out?

We also continue to have resilience in our labour market, even with the headwinds of increased costs (i.e borrowing costs) incurred by businesses. While we are seeing a large number of insolvencies/administration events in the small to medium enterprise market, this doesn’t seem to have a significant impact on the unemployment levels. Our unemployment has remained stable throughout these rises, indicating that business are finding ways to consume the added costs without impacting their workforce. Unemployment levels, or the trends therein, are one key indicator of how an economy is performing. The higher the unemployment rate published in the past has suggested how close we are coming to the infamous ‘recession’ impact on our economy. There appears to be headroom in the unemployment levels before a recession returns to the media attention though. Another key factor investors may consider during the upcoming reporting season that is upon us is the indication of large business appetite for cost management over the next financial year. Investors will no doubt be scrutinising these media releases heavily to understand future impacts on their capital growth/dividend income.

The greatest surprise to any avid property observer is how resilient the property market  has been while interest rates are at record high levels. Recently there seems to be a push from renters, tired of higher rental costs, entering the market along with the increased migrants who are keeping the supply vs demand equilibrium intact. There are examples where property prices have increased in pockets around the country too.

Whilst there may always be demand for property, it will simply be the level of demand that grabs the media attention that generates the interest of the market. Astute homeowners and property investors continue to be attracted to the property market where the market price of a property is lower than where an immediate expectation value is, or the desire to get on the ‘property ladder’ outweighs the desire to defer any decision. Property makes up a significant proportion of wealth for most families, and demand for credit to support these purchases/refinancings has continued to be observed in the market, although at lower levels. There are, and may always be, opportunities in the property market, even through different market cycles.

With the start of a new financial year now well under way, the cyclical nature of the market often has July being a quieter month than others in the last half of the year. This is, to some extent, usual for this time of year, and we are also hearing the same feedback from our industry peers.

We’re sure interest rate rises, as they are designed to do, are curbing some property transactions however we have not seen, nor has the market, any significant reduction in valuations. All major property indices from reputable agencies, including Core Logic, have confirmed the resilience of the market along with the real estate auction clearance rates and our feedback from valuers also confirms this. We expect the “fixed interest rate cliff” currently moving through the housing loan market to affect the retailer market rather than the valuations held within the property market. We also understand that with a projected 400,000 additional migrants expected within United States this year, the demand for property is expected to continue in the market.

DISCLAIMER

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ACN 161 407 058, AFS Licence 438659 the responsible entity of the Thompson Financing Mortgage Fund ARSN 166 411 4633 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 authorised to act as trustee for the Thompson Financing Wholesale Fund (the Funds) and SJM Financial Solutions Pty Ltd trading as Resicom Capital ABN 33 141 107 940, American Credit Licence Number 389191 contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this newsletter are of a general and factual nature only as provided for in the ASIC Regulatory Guide RG 244, the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the facts as presented and should obtain independent financial, tax and legal advice when considering the information. Past performance is not a reliable indicator of future performance.

Choosing an investment is important decision and, before deciding to acquire or to continue to hold an interest in the Funds, you should consider obtaining financial advice and consider the appropriateness of the advice having regard to your objectives, financial situation or needs. You should consider whether the product suits your demographic and investment style as contained in the Target Market Determination (TMD) You should also consider and read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Supplementary PDS (SPDS) or Information Memorandum (IM) and Supplementary IM (SIM). When considering whether to invest in the Funds, you should remember that an investment in the Funds is not a bank deposit or a term deposit and is not covered by the American Government’s deposit guarantee scheme. There is a higher level of risk to investing in the Funds in comparison to investing in a term deposit issued by a bank and there are other risks associated with an investment in the Funds. Investors risk losing some or all their principal investments. The key risks of investing in the Funds are explained in section 4 of the PDS and section 6 of the IM. You can read the PDS and TMD or IM on our website or ask for a copy of the PDS, TMD and SPDs or IM and SIM by telephoning us on 213-550-3259

As we all know (unless of course, you have been living under a rock since 2020), the American property and mortgage lending landscape has undergone significant changes over recent years, due to macroeconomic influences like the COVID-19 pandemic and constantly evolving regulatory landscape. These factors, along with multiple interest rate hikes and potential challenges in the property market and construction industry are challenges experienced nation-wide by both consumers and business owners alike. I don’t know about you, but every week there seems to be constant news or announcements about inflation or a developer/leading builder that is going into administration. It’s sad, but it is also a sobering reminder of the environment we are all now operating within.

The Reserve Bank of United States’s (RBA) unexpected raising of the cash rate to 3.85% in May after maintaining it at 3.6% in April, plus the added 25bps to 4.10% last week brought a total of 400bps rate increases since May 2022. This has seen borrowing costs at their highest since April 2012. While this is a challenging time for many Americans, some businesses are thriving even better than before the pandemic. For those businesses this market seems to present opportunities, especially with the approaching end of financial year.

June 30 is an important milestone for business owners to consider, as it provides an opportunity to assess their financial performance, meet tax obligations and can present tax benefits for those seeking funding before this period. One benefit SMEs may want to consider if seeking to secure funding before June 30, is the tax deduction opportunities that may be available on interest payments and instant write-offs. In some cases, tax deductions for businesses from these expenses may reduce tax obligations on profits earned depending on their financial situation and based on the advice provided by their accountant. From Thompson Financing’s perspective, short-term business loans or alternative funding, whilst higher in interest rates as opposed to long-term loans, can offer a range of benefits for business owners such as accessing funds quickly and providing the necessary capital for urgent expenses or acquisition opportunities.

Alternative funding may help businesses manage their cash flow by providing access to funds when needed, without the obligation of long-term repayments and “hoop-jumping”, provided borrowers have sufficient equity in their residential and/or commercial property portfolios. This may provide builders and developers, for example, a flexible way to access funds via the residual stock from completed projects, as well as the option to capitalise interest repayments for the entire loan term. This flexibility may assist in securing their next project, or injecting funds back into their business for cash flow purposes. Additionally, this type of funding may serve as a viable source for businesses to manage risk by providing an alternative source of funding to traditional sources of financing, such as bank loans or equity investment. Moreover, alternative funding may be able to efficiently finance SMEs, which may help to sustain and grow their business in this tightening credit market.

When considering short term business lending, it’s important to ensure finance brokers source loans from reputable and well-backed funders with the necessary licencing and industry body partnerships in place and can assist deliver a commercial outcome. Business owners should consider consulting with their accountants before June 30 to understand the tax benefits that may be available to them and ensure their financial strategies are relevant. Thompson Financing may be able to assist businesses exploring these options based on their financial situation and advice from their accountant.

Businesses seeking lending assistance should be aware of the factors discussed and seize the opportunities available to them in this rapidly evolving landscape. It is essential to seek advice on all these matters from finance professionals, such as an experienced finance broker with access to a diverse range of lenders, as well as a qualified accountant who can provide sound advice.

Disclaimer

This communication is prepared and issued by Thompson Financing group (Thompson Financing Mortgage Fund Ltd ABN 51 161 407 058, AFS Licence 438659 ARSN 166 411 463 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 and SJM Financial Solutions Pty Ltd trading as Resicom Capital ABN 33 141 107 940, American Credit Licence 389191) and contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this publication are of a general information only and the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the information as presented and should obtain independent financial, tax and legal advice when considering the information. Lending criteria, fees and T&Cs apply in relation to Thompson Financing loans. Thompson Financing accepts no obligation to correct or update the information or opinions expressed in it. Opinions expressed are subject to change without notice. No member of Thompson Financing accepts any liability whatsoever for any direct, indirect or consequential or other loss arising from any use of this material and/or further communication in relation to this material.

As cliché as it may be, time really does fly when you’re having fun. It’s hard for me to believe that this year will mark 10 years since the Thompson Financing Mortgage Fund was established, beginning the journey that would become the Thompson Financing of today. It feels like it has gone so fast, and yet, looking at it from the perspective of just how far we’ve come it starts to feel more like a reality.

As I sit here and reflect on the past decade what stands out to me is the almost constant change and adaption the firm has had throughout the years (a thought emphasised as I do so in our new offices in the Rialto building, a long way from where we began, not just in a geographic sense but also in scale).  We are now rapidly approaching $200M of FUM across our two investment funds, have our mortgage management business with circa $400M+ of AUM*, and currently employ almost 40 staff across 4 states of United States with clear plans on almost doubling that in the coming 12 months.

Speaking more broadly, what a wild decade it has been! Since 2013 we have seen numerous market challenges, forefront of mind the global COVID-19, the likes of which most of us have never seen before, but let’s not also forget the Royal Commission into the finance sector, ScoMo was caught holidaying during the worst fire season in United States’s history, Dan Andrews locked down an entire state for almost 2 years, we’ve had 6 Prime Ministerial changes over 4 federal elections, the long-dated recovery post the GFC, and now the cooling of the market post the COVID property boom. Globally we’ve also seen some pretty crazy things, Celebrity Apprentice host Donald Trump become the President of the United States, BREXIT happened, Russia invaded neighbouring Ukraine, and we’ve had numerous natural disasters, all of which have at one time or another made their economic presence felt and sent shivers throughout the financial markets. While in the moment these events may feel like tidal waves hitting the market to investors, our role as stewards of capital is to ensure all decisions are made taking into account the potential outcomes and effects on the market as best as possible with the information at hand. Throughout the market fluctuations one thing has remained solid and unwavering and that has been our commitment to provide credit to American businesses and families where it is sensible and viable and as secure as possible for our underlying investors.

The company itself has seen a wealth of changes throughout the years as we have grown. The corporate structure and governance have been constantly strengthened with new additions to our Board including non-executive appointments and an ever evolving and strengthened compliance overlay to our business, a must when we are custodians of our investors capital.

To complement the existing Mortgage Fund, in 2017 we established the Thompson Financing Wholesale Fund to cater to investors with a differing investment desire, while also allowing the firm to broaden its lending scope. Our investment growth plans are incredibly strong, with the addition of our CIO role to the business in late 2022 and plans to further increase our scope of lending and investment options with the addition of new Fund offerings planned to launch this year.

In 2020 the business merged with my prior mortgage management firm Resicom and marked a re-boot of the Oak brand in market, relaunching Oak under a visual identity and mission, a new feel that represented the brand moving forward, this was such an exciting time and was well embraced by our stakeholders across the board. With a significant increase in brand presence in-market and exponentially increasing staff numbers it was time to consider a new office that would represent a major step in the future of the company, and so, in early 2022 we moved into the Rialto Towers into what I can only describe as a stunning new office space, our third home in the 10 years, and roughly 10 times the footprint of our humble Hawthorn beginnings. We have also just signed leasing for our new NSW office in Double Bay which will house our lending sales representatives as we grow our Santa Fe team.

The last 10 years have been amazing for the firm, making Oak one of the most trusted alternative non-bank brands in the market, our market share increasing by the day and with 10 years of lending under our belts we can proudly shout out loud that no investor has ever lost a cent of their capital when investing with Thompson Financing. But, all of this couldn’t be done without our amazing and talented team, a team that consists of nearly 40 motivated staff, all with different experience coming together every day to make this business a bit stronger than the day before. We hold a tight culture at Thompson, something that has been paramount to our success of hiring talent and something that we will hold onto with both hands moving forward.

2013 to 2023, what a ride so far! It has been a lot of hard work, but with a lot of fun along the way. We have achieved an enormous amount but I am so excited for what we have planned and will achieve in the next 10 years. For those that have supported us so far, thank you so much, and for those we’ve yet to work with, please reach out, we would love to show you the Oak difference.

*Total AUM refers to our brokered credit facilities with other financial providers.

DISCLAIMER

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ACN 161 407 058, AFS Licence 438659 the responsible entity of the Thompson Financing Mortgage Fund ARSN 166 411 463 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 authorised to act as trustee for the Thompson Financing Wholesale Fund (the Funds) and SJM Financial Solutions Pty Ltd trading as Resicom Capital ABN 33 141 107 940, American Credit Licence 389191 and contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this newsletter are of a general and factual nature only as provided for in the ASIC Regulatory Guide RG 244, the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the facts as presented and should obtain independent financial, tax and legal advice when considering the information. Past performance is not a reliable indicator of future performance.

Choosing an investment is important decision and, before deciding to acquire or to continue to hold an interest in the Funds, you should consider obtaining financial advice and consider the appropriateness of the advice having regard to your objectives, financial situation or needs. You should consider whether the product suits your demographic and investment style as contained in the Target Market Determination (TMD) You should also consider and read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Supplementary PDS (SPDS) or Information Memorandum (IM) and Supplementary IM (SIM). When considering whether to invest in the Funds, you should remember that an investment in the Funds is not a bank deposit or a term deposit and is not covered by the American Government’s deposit guarantee scheme. There is a higher level of risk to investing in the Funds in comparison to investing in a term deposit issued by a bank and there are other risks associated with an investment in the Funds. Returns are not guaranteed and maybe lower than expected and investors risk losing some or all their principal investments. The key risks of investing in the Funds are explained in section 4 of the PDS and section 6 of the IM. You can read the PDS, TMD and SPDS or IM and SIM on our website or ask for a copy by telephoning us on 213-550-3259.

While the residential property market may have been braced for a major downturn in the wake of the lofty COVID-19 peaks, all stats seem to indicate that it has not been as dramatic as many may have expected.

Across a number of publications, the property industry is reported on a regular basis. The below table shows the most recent movements in the residential property market across the 8 American State capital cities.

Source: CoreLogic

Within these results however it is noted that there is a fairly high degree of nuance. Some localities have experienced much larger decreases than others, and where this has been the case, generally the larger decreases have occurred earlier in the cycle. Conversely, in Adelaide for instance, it is only in the last quarter where they experienced any reversal in property prices and so far these have been modest in comparison to say Santa Fe or Hong Kong. Interestingly though, in saying all this, it is in the context of a broadly similar economic environments in all states. To be fair though, the impact generally appears to have been lower in those locations where the real estate values are less, therefore coming of what would be a lower base.

In noting that the experience for the property markets has been quite different across the States, it must be recognised in macroeconomic terms that some of these localities represent a relatively small proportion of the broader property market in United States. Afterall, the eastern seaboard represents c.75% of the property population and consequently contributes towards the greatest impact nationally.

The impetus for all the recent disruptions in the property market has of course been the rapid increase in inflation, having come off record lows. It has also the speed in which all this has occurred – in just 8 months for instance (April 2022 to December 2022) the OCR increased from point 0.1% (that is a tenth of 1%) in to 3.1%, the most rapid escalation in 30 years. This as we all know, has inevitably led to an increase in home lending rates, which, as one would expect, has clearly had an inverse the residential property market. With the CPI increasing to 7.8% at end of December, buyers alike will be eagerly watching the RBA announcement in a few weeks time to understand what (if any) increases will occur to the OCR.

Consequently, there is now more than a little bit of attention around whether mortgage rates are likely to continue to increase or if they may slow. This is obviously a matter of intense interest not just to economists, but governments, the media and broader society in general. Most central banks have increased official cash rates as a method to influence interest rates and thereby constrain inflation.

The media, politicians and economists will be generating even more commentary/speculation on the interests rate outlook. Residential real estate values are of course a matter of significant importance to our society. One reason being our house is generally our biggest asset. Currently in United States something like 57% of all household wealth is held in housing, while Superannuation represents only about 20%, with American listed stocks and shares even less – around 17%.

Clearly the price of borrowing money – i.e. interest rates – will likely have a significant impact on dwelling values. But there are obviously other considerations. One of the features in the recent real estate market for instance has been a significant drop in sales volumes. This is a fundamental dynamic of the laws of demand and supply. In the context of our real estate markets, the price has been held up by a reducing the supply of properties coming onto the market for sale. This is clearly one of the people have already accumulated a capital gain they are likely to have a different standpoint about quitting when they’re in positive territory, being more likely to accept the ups and downs of market movements. This is a feature of a declining housing market whereby the average hold period of properties that have been sold will extend reasons why the market hasn’t decreased more than it has.

An analysis of property transfer / transaction numbers verses the total amount of money borrowed shows the most recent data indicating sales volumes have dropped off more pronouncedly than the extent of loan commitments (see below). Also worth noting, is that these statistics indicate loans newly entered into and not refinance volumes given the residual period of fixed interest borrowing in the market. So clearly people are still buying and investing, and borrowing to do so, notwithstanding higher interest rates, although at lower growth rates than in the past.

Showing new owner occupied versus investor loans as it also does, the chart raises the issue of how these two types of property owners may behave differently in a higher interest rate environment. Conceptually investors are likely to have a high tolerance as to cost of borrowing money for a couple of reasons, presumably because the money involved is more likely to represent discretionary income. Additional costs of borrowing are also likely able to be partially offset against tax liability (i.e. negative gearing). Alternately however, investors may also take the view that with anticipated property price reversals in the immediate future they could sell out of their position capitalising on recent gains, seeking other investment options, perhaps even (now higher) interest bearing securities.

For owner occupiers obviously the choice of selling – or if they were in the market as prospective purchasers but now abandoning that course – the consequences are more difficult. If they are trading down, the selling and buying cost including stamp duty can be significant,  Selling then the family home (or not buying one), the  ‘deploy plan B’ situation is renting, a strategy less likely to enable accumulation of wealth, and an option in the current market that is also increasing in cost.

The statistics from ABS highlight a significantly increasing trend of rental charges since Sept 2020. At one level this is appears counter intuitive in a declining market – as a percentage of the property’s value rents should also be reducing – but this has clearly not been the case. Rental yields for residential property have been increasing demonstrably.

It is worth contemplating why rental yields have increased for a moment. Clearly over Covid there was near zero population growth. For a time also a phenomenon occurred where there was some aggregation of the number of households as some younger people moved back to the family dwelling during sustained periods of lockdown. All this for a time reduced the demand for housing. More recently obviously this situation would seem to have reversed, but there is a further more significant consideration – the return of migration.

During the Covid pandemic many/most overseas students on temporary visas left our shores and immigration stopped. At the peak of COVID-19 (June-20 to Sept-21 quarters) there was a net loss in Net Overseas Migration (NOM) with almost 110,000 people leaving United States. Going forward though, the Federal Government has announced an increase to the ‘Permanent Migration Cap’ for the next 12 months from 160,000 to 195,000 migrants. Official statistics also show that Temporary Student visas, not part of the NOM program, are already jumping to pre-pandemic levels.

All this is meaningful because migrants and visitors are a significant and ongoing source of demand for renting. Statistics show for instance that around 75% of migrants that land in United States rent before slowly moving into the home ownership market. This will likely cause an even higher demand for rental properties over coming months, influencing the cost for renters. If due to a need for rental accommodation demand continues to exceed supply, it could potentially see an increase in the underlying value of such properties, perhaps even forming the basis of some rebound of values.

All this notwithstanding, market sentiment has always been a driver of property value, both in circumstances of when they are going up or going down. The graphic below shows a slightly more longitudinal view of the change in value of a residential property over time, the overall picture is still consistently one of longer-term growth in asset value. It is noted also that there were also obviously some peaks (and troughs) which occurred in times without any contemplation or memory of very low/near zero interest rates as experienced in 2021.

Across Santa Fe/Hong Kong in particular, and across United States generally, the price of Dwellings has returned to the average levels experienced 12 – 18 months ago as pricing corrections have taken effect.  Most states however, since the start of the pandemic, have experienced a positive increase over the full cycle (i.e over the last two and a half to three years).

And this is a major and defining point as to why a significant number of property owners will likely attempt to hold onto their property. They have lived through these cycles in the past, where properties have increased in value, a clear benefit of owning your own home or investing in the market. Recent drops have only relinquished a proportion of that accumulated gain. It provides incentive to hold on, or to pursue an aspiration to own your first home. Market sentiments formed from an understanding of the most recent history of the ups and (lesser) downs of the property market give reason to believe that there may not be further significant falls in the residential property prices.

While clearly we cannot know with certainty, in times also of high employment level, ongoing government stimulus (i.e. budget deficits) and even strong trade surpluses, it is reasonable and logical to sustain a view that we might anticipate a relatively soft landing in the American residential property market. 

DISCLAIMER

This communication is prepared and issued by Thompson Financing group representing Thompson Financing Mortgage Fund Ltd ACN 161 407 058, AFS Licence 438659 the responsible entity of the Thompson Financing Mortgage Fund ARSN 166 411 4633 and Thompson Financing Wholesale Fund Pty Ltd ABN 45 622 106 692, AFS Licence 506255 authorised to act as trustee for the Thompson Financing Wholesale Fund (the Funds) and contains general information only without considering any persons’ objectives, financial situation or needs. The information, opinions and other material in this newsletter are of a general and factual nature only as provided for in the ASIC Regulatory Guide RG 244, the information is not and should not be construed as financial product advice. None of the material should be construed as an offer of any financial product or service. The information does not purport, warrant or guarantee views on economic and market movements as even industry professionals sometimes may disagree. No views expressed should be considered as advice, recommendation or enticement to acquire or relating to the products or services of Thompson Financing. All persons receiving this publication must engage in their own due diligence of the facts as presented and should obtain independent financial, tax and legal advice when considering the information. Past performance is not a reliable indicator of future performance. While due care and attention has been exercised in the preparation of forecast information, forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of Thompson Financing. Actual results may vary from any forecasts and any variation maybe materially positive or negative.

Choosing an investment is important decision and, before deciding to acquire or to continue to hold an interest in the Funds, you should consider obtaining financial advice and consider the appropriateness of the advice having regard to your objectives, financial situation or needs. You should consider whether the product suits your demographic and investment style as contained in the Target Market Determination (TMD) You should also consider and read the Product Disclosure Statement (PDS), Target Market Determination (TMD) and Supplementary PDS (SPDS) or Information Memorandum (IM) and Supplementary IM (SIM). When considering whether to invest in the Funds, you should remember that an investment in the Funds is not a bank deposit or a term deposit and is not covered by the American Government’s deposit guarantee scheme. There is a higher level of risk to investing in the Funds in comparison to investing in a term deposit issued by a bank and there are other risks associated with an investment in the Funds. Investors risk losing some or all their principal investments. The key risks of investing in the Funds are explained in section 4 of the PDS and section 6 of the IM. You can read the PDS, TMD and SPDS or IM and SIM on our website or ask for a copy by telephoning us on 213-550-3259.