Fidelis Private Fund, founded in 2019, has generated consistent annualized returns of over 8% to our limited partners since its inception. We are grateful to our investors (limited partners) and our borrowers, many of whom are repeat clients, for their consistency and faithfulness. The foundation of our success is the quality of relationships we have cultivated over the years.
We are often asked the questions, “How do you achieve such an excellent track record? What are the
secrets?”
There are no real “secrets” as we clearly communicate our guiding principles and strive to adhere to them in every business practice and transaction.
Here are a few of those guiding principles and practices:
1. Relationships: Over the course of my career, I have developed lifelong relationships and friendships with clients. When you do numerous transactions with people, you really get to know them, their habits, and ultimately their character. Actions speak louder than words. And it’s on the foundation of proven faithfulness and action that we base in part our decisions about whom to lend to and what projects have merit.
2. Vision: Our vision is to help people to achieve their financial goals. That is not reserved just for our partners or us but extends to our borrower clients, our staff, and the professional colleagues we work with. That vision and intention create trust and cooperation, which are keys to our success.
3. Market and Industry Wisdom: When it comes to evaluating loans and borrowers, it takes wisdom to make the right decisions. Wisdom often relates to the sense of value and opportunity. We take the place and perspectives of our borrowers so we can assess the potential of the loan and the upside. The wisdom and experience we have developed for applying unique and knowledge-based underwriting criteria along with finely tuned metrics (i.e., acceptable LTV ratio and debt service coverage) ensure there is optimal value and sufficient equity for adequate security for our investors.
4. Discernment: I have been fortunate to have been in the commercial real estate lending and underwriting business for 30+ years and have personally been involved in numerous transactions totaling over $1 billion. I have made thousands of decisions related to lending opportunities where character assessment was proven to be the most important aspect of the decision process. I have come to understand the true characteristics of a legitimate deal and the sense of the trustworthiness of potential borrowers. I apply that experience every day on behalf of our partnership and seek to instill that knowledge and those guiding principles with our Fidelis team.
5. Geographic Focus: Fidelis is not trying to be all things to all people. Our lending focus is not all over the United States as many private funds promote. Rather, we continue to cultivate our knowledge and network in the San Diego and southern California areas where we know the market rather than risk lending in markets we don’t know. If there is a loan we fund outside the California market, it is because of the strong client relationship. With a Gross Domestic Product (GDP) larger than many countries, San Diego County is one of the most beautiful and prosperous places in the world. Historically, it has been a place of amazing enterprise. We are proud to be a part of that legacy and to enjoy the opportunities here.
So how do you ensure loans stay on track, and what do you do when there is uncertainty in the market?
We are thankful for the remarkable consistency of our clients. Over the past three-plus years, Fidelis has funded over 100 million dollars in loans with only a few delinquent late payers, which were quickly resolved; we currently have no loan delinquency, nor have we foreclosed on any properties in the history of our fund.
Here are a few specific approaches we take to underwriting our loans and maintaining positive and productive client relationships:
1. We Build Lifelong Relationships: You may have noticed that this point is similar to the one in the list above because it’s the strength of relationships with our clients that is our most important intangible asset to the fund’s security and success. Many of our client relationships embody friendships and trust built over time. Our clients don’t take that lightly, personally or professionally. It’s that foundation of trust and relationship that guides our actions and protects our contractual engagements. We strive to do right by our clients, and our clients overwhelmingly likewise strive to do the same in their relationship with Fidelis.
2. We Maintain Close Communication: We stay in close touch with all our clients with frequent communication so we can monitor the status of loans, and if any problems arise, we can address them immediately to assist in ensuring success and to protect our security. The reality is that “stuff happens.” We stay in touch so we can help walk our clients through different situations, problems, regulatory issues, etc. to help achieve mutual success. Our vision is to help others achieve their financial goals and have their best interests in mind. This leads to transparency and openness about the overall situations.
3. We Start with the End in Mind: We start by knowing there is an exit strategy for getting the loan paid off. Our goal is not to eventually own the property in hopes the borrower defaults but to help the borrower succeed and repay Fidelis as soon as possible to turn around and do it again. We underwrite the loan and consider what we believe the future market holds for the ability to get the loan repaid, whether that is selling the property or refinancing as the exit strategy.
4. We Reduce risk by Maintaining Adequate Security: Every Fidelis loan is secured by real property (one property or multiple properties) when cross collateral is needed. Currently, approximately 80% of our loans are “First Trust Deeds.” That means in the event a borrower defaults on a loan, Fidelis Private Fund is in the first position to be repaid, and if we are in 2nd position, we underwrite the loan knowing we can cover the 1st position as if we were in the first position to reduce the risk. Our target Loan to Value (LTV) ratio for the overall portfolio is 60%, providing adequate security for our investors.
5. We Provide Additional Measures to Reduce Risk for Our Investors: Fidelis Private Fund invests in loans as security on behalf of its partnership. While offering an excellent yield that has exceeded 8% since inception, Fidelis Private Fund has a target loan loss reserve of 2.0% or higher of the total loan commitments at any one time, which provides another layer of security for the Fund. Those loan loss reserves provide a buffer in the case a negative situation arises, resulting in a loan loss that would come out of the reserve instead of the investors’ income or capital.
The Core of Our Strategy: Our Commitment to this Business and Its Mission
The general partner of Fidelis Private Fund is comprised of John Lloyd (the fund manager), Chad Ruyle, Jon Maddux, and Sam Attisha. We each have our own money invested in the fund. When it comes to describing why and how we succeed, it comes down to the old proverbial expression, “We are all in!” We are personally invested with over $5.3 million of our own money invested in the fund, and we don’t profit or succeed unless our investors succeed. We thus greatly value those who entrust us with their hard-earned money to put to work with a mission that positively impacts people and our communities.