Thrivent Church Loan and Income Fund (XCLIX) has an inception date of September 28, 2018 and seeks to produce income. As an interval fund, the Fund offers daily subscriptions and quarterly redemptions.
This fund seeks to produce income by investing in church loans and other debt securities. Church loans are privately issued mortgages to churches and other non-profit organizations with a Christian mission and can also include bonds issued by these organizations. The fund will invest in mortgage-backed securities and is not restricted in investing in other types of securities, including derivatives. As an interval fund, the Fund is not subject to regulatory limitations on illiquid securities, such as church loans.
The Fund has a long-term target allocation of 70% church loans and 30% mortgage-backed securities and cash. The church loan segment of the Fund aims to provide impact and income, while the mortgage-backed segment seeks to provide income and liquidity for the quarterly redemption process. The portfolio management team works with Thrivent’s Church Finance group to source and structure the church loans. They use various research techniques, both quantitative and qualitative, to assess a borrower’s ability to repay the loan. The portfolio is constructed through a bottom-up process and is not managed with a target duration or yield. However, fund management will pay attention to these and other factors in building and managing the portfolio.
Church loans include mortgage loans and mortgage bonds issued by non-profit organizations with a Christian mission, such as churches, denominations and associations, and educational institutions. Church loans are not actively traded and are typically held to maturity. As a result, church loans have limited liquidity and may be difficult to value. The management team aims to invest in higher quality church loans that are secured by the borrower’s real assets.
The Fund has received an exemptive order from the SEC that permits it to co-invest in church loans with other Thrivent affiliated funds and is expected to provide the Fund investment opportunities that otherwise would be difficult to access.
The Fund invests primarily in church loans and should not be considered a liquid investment. The Fund also invests in mortgage-backed securities. The value of the Fund is influenced by factors impacting the overall market, debt securities in particular, and specific issues. The Fund may incur losses due to investments that do not perform as anticipated by the investment adviser. The Fund is a newly-organized and non-diversified closed end interval fund.
Church loans are mortgages taken out by non-profit organizations with a Christian mission, or bonds issued by these organizations. They are typically not listed on any national securities exchange and no active trading market exists for them. Church loans are primarily backed by real estate and are vulnerable to factors that affect the real estate market. Default risk is the risk that a borrower will not be able to make principal and interest payments in which case the value of the Fund may be negatively affected. There are many factors specific to churches that may impact a borrower’s finances and its ability to make payments.
The Fund has an interval fund structure, which means that, unlike with an open-ended mutual fund, investors cannot sell their shares daily. The Fund conducts quarterly repurchase offers. It is possible that a repurchase offer may be oversubscribed, and shareholders may only be able to have a portion of their shares repurchased.
Bond prices may decline during periods of rising interest rates. Credit risk is the risk that an issuer of a debt security may not pay its debt. The value of mortgage-backed securities will be influenced by the factors affecting the housing market. In periods when dealer inventories of bonds are low in relation to market size, there is the potential for decreased liquidity and increased price volatility in the fixed income markets. The Fund has received an exemptive order allowing co-investment with other Thrivent accounts, which may give rise to actual or perceived conflicts of interest and subject the Fund to the risk of regulatory changes and regulatory actions. The Fund may require a period of time before it is fully invested in securities that achieve a desired portfolio composition for the Fund’s investment strategy.
These and other risks are described in the Fund’s prospectus.