Over the course of 2020, the loan book underpinning the RAW Mortgage Fund grew from £49 million to £78 million and the number of mortgage loans increased from 229 to 344. The early part of 2021 has seen continued momentum with the loan book now exceeding £80 million and over 350 loans.
Our conservative lending criteria has remained consistent throughout putting us in the enviable position of having had no bad debt or write-offs since the Fund was launched in 2015. The average value of loans modestly increased in 2020 from £215k to £228k, and there remain just a handful of loans over £1m. The average loan to property valuation ratio remained very conservative at only 47%, with the vast majority of loans made at 50% of the valuation or lower and the maximum at only 55%.
We continue to lend against high-quality security; around 80% of our lending is secured on residential properties in London and the South East of England. The other 20% consists of residential buy-to-let properties primarily in other major UK cities; we have seen a growing interest in cities such as Manchester, Birmingham, and Liverpool due primarily to the lower capital values and higher rental yields than those available in London.
Thanks to the security of its underlying book of mortgage loans, the Fund delivered gross returns of 4.93% and net returns of 4.43% to institutional investors in 2020, with very little volatility, and no drawdowns. To put this in context, the Fund’s benchmark, a 0-5 year GBP Corporate Bond Index, delivered 3.39% to investors, with greater volatility of returns and a maximum drawdown of 3.69%.
Tim Parkes, managing director at RAW Capital Partners, said “The RAW Mortgage Fund has been remarkably resilient in an unusually uncertain period. The quality of the loan book that underpins the Fund has and continues to show its value in helping us to deliver strong risk-adjusted returns that are highly valued by investors”.