Praetura Inheritance Tax Planning Service is a non-AIM/unquoted BR product. It is an Alternative Investment Fund, which will invest into private trading companies and, currently, is wholly allocated into Quay Street Trading Limited (Quay Street). The latter will lend money to SMEs through various types of asset-backed or secured lending. It has a target return of 4.5% p.a., after all fees.

Why invest

Positives

• Strategy: To fund asset-backed finance, supply sales finance and other lending strategies.

Issues

Future diversification: New lending strategies may be added in the future.

Management

Positives

• Team: The team has a broad range of lending experience among large and small lenders.

Issues

• Track record: Although the team has an excellent track record to date and lengthy experience, Praetura has not yet experienced a full credit cycle.

Nuts & bolts

• Governance: The company board has two independent directors.
• Diversification: The company lends into existing lending companies and has had excellent diversification from the outset.
• Valuation:  Loans are valued at face value less impairments, with transactions at NAV.

Fees

• Annual fees: There is a service charge within the company of 2% p.a., plus a management fee of up to 0.5%, payable on exit and contingent on a minimum 4.5% p.a. return. Praetura will also benefit from a positive spread on the lending in its operations.
• Other fees: A 2% initial fee and 1% on all trades; no performance fee.

Risks

• Target returns: The target return is 4.5% p.a. The product has consistently reached this target to date and modelling suggests that only the most severe credit events could affect that.
• Investment risk: In common with most products in the non-AIM Business Relief (BR) sector, Praetura targets a lower return to investors than the yield on the underlying assets. It also provides a unique capital buffer, which reduces significantly the risk of credit losses to investors.