FAQ
Archelon Private Capital Fund I is an alternative investment opportunity available to individuals, companies, trusts, pension funds, and institutional investors. The Fund offers investors the opportunity to be exposed to a diversified portfolio of senior secured private credit (debt) transactions, that not only deliver market leading returns on investors’ capital but provides them with capital protection through the registered legal collateral rights to tangible assets held as security, at a minimum of 1.2 times capital deployed.
Archelon invests capital into established and proven small to medium enterprises operating predominantly in South Africa, providing these businesses with a bespoke structured funding solution that supports their growth and sustainable operation. These transactions are structured to deliver superior risk adjusted returns to investors, while securing registered legal rights through mortgage bonds, special notarial bonds, etc. on independently valued tangible assets.
Individuals, trusts, family offices, and companies can invest in the Fund. Pension funds are also permitted to invest in the Fund as governed by Regulation 28 (as amended) of the Pension Fund Act. Unit trust and hedge funds can invest in the Fund depending on their deed as governed by the Collective Investment Scheme Control Act.
Investors’ capital is not guaranteed; however, their capital is secured through registration of security rights against tangible assets held as collateral to a minimum of 1.2 times capital. This covenant is monitored on a regular basis, with additional security being registered should the capital cover drop below the minimum required.
The recommended term of investment is 5 years.
During the initial lock-up period of 12 months, Investors can request an exit their investment with a minimum notification period of 3 months. An approved early redemption will be subject to a lock-up period redemption fee of 35%.
During the recommended term of 5 years, Investors can request an exit with a minimum notification period of 3 months. An approved early redemption may be subject to an early redemption fee, calculated as a reduction in the average net return earned in line with the appropriate interest yield curve.
At the end of the 5-year recommended term, Investors can redeem their investment capital and undistributed return. Investors have the option to remain fully or partially invested in the Fund at the discretion of the General Partner.
The current nominal rate of return targeted per annum is 13.71% (net of fees), being a variable linked rate to the prevailing Repo rate quoted by the South African Reserve Bank (SARB), currently 7.5% as of 31 January 2025.
The return is calculated daily and compounded monthly.
The average effective annual rate of return, net of fees, should returns be reinvested and compounded monthly, is 19.52% per annum, being a 1.98 times money return over the 5-year period.
Typical money market bank accounts will offer you 4% - 8% nominal rates per annum, with longer 5-year term investments such as fixed deposits offering you 8% - 10% nominal rates per annum.
The effective rate of return of an investment is determined by accruing returns (net of fees) to investors monthly. This return is then reinvested monthly (compounded) and results in an increasing rate of return on your initial capital throughout the investment term, being the effective rate of return.
The average effective rate of return is calculated by taking your forecasted maturity balance, less your initial investment, to return the total cumulative growth over the investment term. This cumulative growth is divided by your initial investment to determine the total cumulative return earned over the investment term. This is then divided by your investment term. This number will be the average effective invest rate, being the rate of return per annum that was generated on a flat basis over the investment term.
Yes, investors can elect to have their returns distributed on a monthly, quarterly, semi-annual, or annual basis. This election can be for a full or partial distribution as negotiated with the General Partner. The distribution of returns will affect the compounding of returns and thus reduce the average effective annual rate of return generated by the Investors investment.
Investment risk profile is determined based on market best practices and is a rating scale of 1 - 7 from lower risk (1) to higher risk (7). Risk is determined based on the volatility of the investment (how often the underlying value of your investment fluctuates up and down) and the probability for a capital loss will be realized.
The investment risk profile of this investment is considered low to moderate (3). The investment delivers a consistent return profile with low to no volatility, with underlying capital preservation provided through the secured collateral, that can be disposed of and realised to recover and repay outstanding capital and returns.
Family offices and UHNW individuals have been investing in opportunities like these for decades generating the alpha for their investment portfolios. While the returns look “unicorn” like, they are actually in line with the rates of interest that the SME market is being expected to pay. These rates have been paid to banks and other finance houses traditionally, who then offer investment opportunities in the form of their issued bonds (form a considerable portion of income and enhanced income funds) at much lower rates or through retail deposits in their money market and notice and fixed deposit accounts.
Archelon is creating is removing these layers and bringing investors closer to the action and hence providing them with the ability to earn a greater share of the interest expense to the end client. The clients included in the portfolio are what would be considered bankable clients, i.e. able to and have raised funding from the banks in the past, but have grown weary of the banks service and attitude and offering no additional value add. These borrowers are established businesses in South Africa, with a strong trading history, offering significant tangible collateral security for the credit facility in the form of property, movable assets, etc. which are valued and legal security rights registered.
With investors being brought closer to the revenue generated from the private credit transaction, they are able to earn “equity like” returns in the actively managed portfolio, while the investors are provided with capital preservation through the registered security rights in the senior ranking credit transactions. Unlike private equity, the exit of the transaction is structured and is known upfront, with the credit transactions having an end date, a structured amortisation, and repayment profile.
Yes, the fund is regulated through the Investment Manager by the Financial Sector Conduct Authority (FSCA) and the Financial Intelligence Centre (FIC). The fund is further regulated by the Information Regulator in South Africa in respect to the Protection of Personal Information Act, and the Promotion of Access to Information Act.
The Investment Manager of the Fund is Verum Capital (Pty) Ltd, an established Cat II Financial Services Provider, offering tailored financial services solutions to Individuals, Companies, Financial Service Providers and independent Financial Advisors.
Yes, it is repaid should the investor wish to fully redeem from the Fund. The investor can elect to remain invested and roll their investment for a further period as negotiated with the General Partner.
Upfront Fee:
No fees are charged for the raising of investment capital, meaning 100% of the capital invested by you is deployed into return generating assets.
Management Fee:
An annual management fee of 1.2% (excl. VAT) of the assets under management is paid to the Investment Manager. This fee is calculated daily, and paid monthly in arrears.
Performance fee:
The General Partner will earn a performance fee of 20% (excl. VAT) on the out performance of the return on the net asset value of the limited partners’ interest above the benchmark return compounded annually. The benchmark return is set at Jibar + 2.25%, currently 9.81% (25 February 2025) per annum.
Investment assets are selected through a thorough due diligence process, that culminates with the approval by an experienced Credit & Investment Committee prior to deployment. Through a proprietary network numerous potential transactions are sourced, enabling Archelon Private Capital to “cherry pick” those that will deliver consistent returns with limited loss given default.
The Credit & Investment Committee will consider transactions based on the investment mandate and credit policy, considering the following:
- The borrower must be an established company, with a good trading history that will pass the extensive due diligence process.
- The borrower must be credit-worthy with a good credit history.
- The borrower must be able to provide adequate security cover in the form of tangible and executable security rights to the minimum level required, with the ability to supplement this cover in the future should the requirement arise.
The Fund has secured an extensive proprietary list of private credit transactions of approximately R450 million.
The minimum capital commitment from an investor is R2 million, with the minimum first drawdown on this commitment being R1 million.
There is no maximum investment amount, with larger amounts potentially being able to negotiate special nominal returns.