May 2021 – GPS rates set with the long term in mind

Newsletter

Recently some of our investors have called asking about the chance of a drop in the GPS rates. To answer this question, GPS does not foresee a decrease in our target distribution rates to investors in the near future.

The team at GPS have done a considerable amount of analysis on the subject and we expect to continue paying 5.50% p.a. for the GPS Invest Pooled Fund and 6.00% p.a. for future GPS Invest Select Fund opportunities for some time.

Of course, we cannot make any guarantees, particularly in these uncertain times.

But we do this analysis because we know our investors appreciate consistency. When we change our target distribution rate, it is with the knowledge that we intend to hold that rate for the long term.

In comparison, some investment funds have distribution rates that fluctuate on a regular basis. This can be due to a different methodology in calculating rates.

GPS works on the basis that any management fees we earn are after the distribution rate paid to investors i.e.:

Income earned minus target investor distribution rate equals GPS’s management fee.

Some others work on the idea that distribution rates to their investors are what is leftover i.e.:

Income earned minus management fees equals investor distribution rate.

This leads to fluctuations.

Maintaining a consistent distribution rate is a balancing act that GPS takes seriously. It is essential to set rates that are attractive to the type of borrower we want to work with, while continuing to pay the highest possible distributions to our investors.

Richard Woodhead | Managing Director

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