Finexia’s Childcare Income Fund secures ‘very strong’ rating from Foresight Analytics & Ratings

Private credit specialist Finexia Financial Group (ASX: FNX) has secured a “very strong” investment rating for its flagship Childcare Income Fund which currently is edging close to $60 million in funds under management.

The rating by independent data and research firm Foresight Analytics & Ratings highlights the strength and stability of the Finexia Childcare Income Fund, underscoring its potential to deliver consistent and attractive returns to investors.

“The ‘very strong’ rating is testament to the strategic direction, risk management and credit management of the fund,” says Finexia CEO Patrick Bell (pictured).

“It also represents an affirmation of the exceptional growth in funds under management that we have achieved over the past year in support of sustained demand for childcare services across Australia.”

The Childcare Income Fund generates enhanced income returns for investors through the provision of financing solutions to experienced and successful childcare operators to open, trade-up, acquire and construct childcare centres across Australia.

The fund, which is currently returning 10 per cent annually paid in monthly instalments, provides investors exposure to private credit, an alternate asset class that offers secured loans to childcare centre operators who are upscaling their business.

The Finexia Childcare Income Fund was launched in late 2022 as a vehicle to provide short-term funding to experienced childcare operators.

In its analysis of the fund, Foresight Analytics & Ratings finds that due to the fund manager’s investment process and “careful curation of eligible borrowers”, the loans are considered to be “highly attractive” coupled with “low repayment risk given the high operating yields well-placed and managed childcare centres have consistently generated”.

Foresight says the fund’s monthly return presents a “compelling risk-return proposition for investors”.

The analyst bases its conclusions on two key elements, with the first being the “quality of the loans and the manager’s investment processes that contribute to this quality”.

“Second, the fund provides a niche form of non-bank lending in a segment that is characterised by strong tailwinds and attractive structural characteristics for a non-bank lender,” says Foresight Analytics.

“It is also a segment where the targeted borrowers have business models that have little exposure to the economic cycle. As such, this segment is materially different to the larger Australian private debt landscape. In short, we believe the Fund may serve as a strong source of portfolio diversification within a broader private debt portfolio.”

The Finexia Childcare Income Fund late last year benefitted from Finexia raising $25 million in the first tranche of a securitised note issue to capitalise on sustained growth in the fund.

The initial round was part of a $50 million securitisation facility that is aimed at ultimately driving assets under management for the fund to $100 million.

“The ‘very strong’ investment rating for the fund underscores the due diligence Finexia applies to the fund’s loan portfolio and this acknowledgment reinforces our confidence in the fund's strategy and future prospects," says Bell.

“With an actionable pipeline of about $100 million to execute over the next 12-months, we remain committed to delivering sustainable and attractive returns for our investors.”

Bell adds that the Foresight rating is expected to enhance the attractiveness of the Finexia Childcare Income Fund to both existing and potential investors, further supporting the fund's continued growth and success.