Historically accessible only by large institutional investors, credit has emerged as an attractive addition to the defensive allocation in wholesale and retail investor portfolios.
Including credit as part of a diversified portfolio can offer investors a number of key benefits.
Potential for strong, enhanced yields
Regular, stable income
Potential for regular and predictable income secured via contractual borrower agreements
Returns have historically had low to negative correlation to other asset classes
Returns are generally less volatile than equities as they are contractually agreed
Diverse investment opportunities: credit market segments
As with other asset classes, there are a range of different credit market segments and opportunities for investors to access.
- Commercial loans to businesses, loans to consumers and residential mortgages
- An investor is a lender and earns a return through interest and fee income paid by borrowers
- 'Private' means the loans are not issued by banks or traded in public markets
- Non-bank lenders, including private credit investors, are increasingly meeting the needs of borrowers, while retaining the benefit of strong contractual protections
- A $3 trillion market experiencing strong and consistent growth1
Real estate credit
- Loans to finance the purchase or development of commercial and residential property
- Properties used as collateral or security and the loans made are contractual in nature
- Investors receive fixed payment dates of interest and return of capital
- Non-bank lenders are increasingly gaining market share and providing borrowers with an alternative source of capital
- Investing into loan portfolios or other structured instruments that provide exposure to large pools of loans
- Include public and private Asset-Backed Securities (ABS) and Residential Mortgage-Backed Securities (RMBS):
- ABS: a type of fixed income investment where interest payments are linked to and secured against the performance of an underlying pool of loans
- RMBS: similar, however the pool of assets are exclusively loans secured by residential property.
Invest with a credit specialist
We have significant expertise in credit, non-bank lending and specialty finance. With an unbroken track record of credit AUM growth, our institutional, wholesale and retail clients currently entrust us to manage $1.6 billion on their behalf.2
Recognising we are managing the defensive part of an investor’s portfolio, our philosophy and priority is to protect investor capital while generating resilient returns with downside protection.
We do this by maintaining a strong focus on risk management. We target investments with robust fundamentals and clear downside protection where we believe returns are outstanding for the controlled or limited level of associated risk.
Three-tiered credit investment philosophy
A focus on protecting capital while seeking to deliver excess returns for low or controlled risk
Credit Evaluation Approach
Evaluate the underlying risk characteristics of the loan, supporting collateral and overall credit portfolio
Rigorous modelling and analysis to assess the serviceability prospects of loans and credit investments
Comprehensive assessment of loan recoverability and asset/collateral strength based on multitude of data-based factors
Our strategic advantage
Our strong in-house expertise and capabilities are our strategic advantage.
- Differentiated access to capital: to fund loan books, unlock growth and capture returns
- Powerful data analytics: to support robust commercial and risk decision making
- Cross-pollinating ideas: across asset management, corporate advisory and equities to create value
- Risk management culture: founded on principles of alignment and downside protection
Our investment solutions
For retail investors
- MA Priority Income Fund. Diversified exposure across a range of credit market segments, targeting a return of 4% p.a. over the RBA Cash Rate (net of fees and costs)
- MA Secured Real Estate Income Fund. Exposure to a portfolio of first lien mortgages over Australian property, targeting a return of 5% p.a. over the RBA Cash Rate (net of fees and costs)
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In an interview with AusBiz’s Kyle Rodda, our Head of Real Estate Credit, Drew Bowie, provides an introduction to the asset class and its advantages in a rising interest rate environment.
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As in all investment decisions, the experience and track record of the asset manager is an important factor. So, what are the key questions investors should ask when considering investing in real estate credit?
Mortgage security | The bedrock of real estate credit
The cyclical and structural case for investing in the private market alternative of real estate credit is strong. As part of a diversified portfolio, it can offer a reliable and inflation-adjusted income return.
Equally important is the defensive strength and clear line of sight for downside capital protection provided by the security attached to its underlying investment – the first ranking mortgage.
- Reserve Bank of Australia, D2 Lending and Credit Aggregates – December 2020.
- As at 31 December 2021.
- Net of fees and costs.