The Sugarloaf Fund
Profitability isn’t always found in the most obvious of places. Yet, when a new way to increase wealth is discovered, it can be both exciting and rewarding!
The Sugarloaf Fund has taken a somewhat common strategy, distressed debt acquisition, and added a twist that not only offers a competitive rate of return, but also maximizes the ways this fund can increase an investor’s assets.
The Sugarloaf Fund invests exclusively in Brazilian distressed assets that fall into a strict criteria designed to offer the greatest return on investment. These assets are generally a) undervalued due to short term economic factors and b) held by a motivated transferor who will likely sell the asset at a discounted price. Because of this, these assets can be purchased at a fraction of their face value in Brazilian Real ($R). Although it is possible that some of these assets will continue declining in value and become worthless after acquisition, discounted acquisition costs coupled with an active collections effort puts investors in a position to earn annualized returns of 15% or greater!
Collections
When an investor buys debt, the reality is that they are simply buying a piece of paper. This piece of paper has no real value until it is turned into cash. One way to do this is to collect on the debt that is owed and in order to effectively make collections; a constant local presence is needed. For this reason, Sugarloaf Fund has partnered with a Brazilian collection agency, Finanacial Management Control (FMC), to manage all collections efforts for the fund. FMC actively works to collect on the debts that Sugarloaf’s investors own as well as constantly striving to improve and enhance collection efforts. Because the debt is purchased at only 3%-10% of face value, even a seemingly small percentage of collections can yield a competitive return.
- Currency Exchange
Since Sugarloaf acquires assets in a foreign currency, it is also possible to make (or lose) money based on current exchange rates. The good news is Brazil’s growing economy puts Sugarloaf investors in a position to further increase the value of their investment.
- The Brazilian Real ($R) has consistently strengthened against the US dollar since late 2002, when it was weakest at $R3.75 to $1 US. Forecasts predict that the trend should continue, with a possibility of the Real approaching a 1:1 exchange rate within the next 5 years. This means that $1 US invested in Brazil today could be worth $1.25, $1.50 or even $2 three or four years down the line.
-
Selling Your Assets
Although Sugarloaf investors do not take any part in the collections process, the fact is once they invest they are now in the collections business. As owners of these distressed assets, Sugarloaf investors have many of the same options as a hardware store owner, a financial advisor, or anyone else who owns a book of business. The most obvious option is to continue profiting, i.e. making collections. Another option is to sell the business to someone else.
- Some distressed assets will be collected on, and some will lose all value. However, the majority of debt owned by Sugarloaf investors simply is held and retains its value. Since the debt is purchased at a large discount, investors will see high returns even though a large portion of their assets remain non-performing. When you combine the return on invest of the business and retained face value of the held assets, you get an attractive opportunity to sell your assets and further increase your capital.
Because The Sugarloaf Fund invests in foreign markets, there is inherently greater risk compared to most investment funds. Investing with Sugarloaf is not for everyone and it is strongly recommended to seek the professional opinions of your advisors beforehand.
If you are a sophisticated investor who is serious about increasing your wealth with an interest in foreign markets, please contact us to receive more information and set up a consultation.
