Debt market ripe for investors

Private debt market

The growth of the private debt market in Australia presents an appealing opportunity for investors, particularly during periods of economic volatility.

The continued growth of the Australian private debt market represents an attractive opportunity for investors looking to shift away from traditional investing strategies, according to a founding partner of an investment firm.

Tanarra Credit Partners managing director Graham Lees noted the private credit market is relatively untapped and provides investors with a diversified investment option that can generate strong returns in times of economic uncertainty, such as when inflation is high.

“Investing in Australian private debt provides stable cash income with an attractive risk-return profile, strong investor protections and a low correlation to other asset classes,” Lees said.

“Private credit at floating rates offers the best opportunity for investors as it provides a natural hedge against inflation and interest rate movements.”

He pointed out the global private debt market has amassed US$1 trillion in assets under management and he expected this figure to grow as banks scale back their financing activities in the face of a predicted global recession.

Further, he acknowledged allocations to private debt can offer downside protection for portfolios against market volatility – a challenge the Australian market is currently facing.

“This year we have started to see many more investors revisiting their investment approach and moving away from traditional strategies, which have performed poorly during the recent market volatility,” he said.

“One of the alternative asset classes which is benefiting from this shift is private credit – it is an effective and defensive investment strategy to have in place during an uncertain economic environment.”

He forecast continued expansion of the private debt market, emphasising that investing in private debt presents investors with a unique avenue to access top-tier institutional investments that may not be easily accessible through other means.

“Over the past month we have seen interest in private debt start to really pick up, with more investors interested in investing into our fund, and we believe the remainder of this and next year will see that trend continue,” he said.


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