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Using private debt for yield, diversification

Posted by: Danielle Moore at July 16, 2020

Private debt as part of a diversified investment strategy can be a good option for those looking for greater fixed income yield.

An article in this week’s Australian Financial Review points to research data showing this option is increasingly popular as a foil to share market fluctuations and the associated value uncertainty this brings.

As with all investments, there are risks to be aware of, however private debt provides an alternate profile to other asset classes that should be considered. 

Private debt mainly involves non-bank lenders making secured funds available to private companies, with these funds then invested in by outside parties. The return on investment is the interest charged on the loan.

It is important for investors to consider each case on its merits, understanding the lender, the security, standards and terms involved.

With the large banks withdrawing from supporting mid-range funding requirements, there is good opportunity for investors to find high quality opportunities in the sector.

With so many factors at play, the opportunity can be significant for both sides of the equation, but it needs to be approached with care and a realistic understanding of the risk-return profile.

In our experience over many years, it is important when formulating these kinds of investments to match the right investors with the right funding scenarios. We work hard to match the investor’s risk profile and yield goals with the right investment, aimed at delivering the desired outcome.

It is an attractive investment option for many people, but getting the right advice and understanding the risks – and reward – involved is key.

If you want to chat about private debt, or other capital funding options, please get in touch.

Danielle Moore

The Trustee for the Rebus Capital Partners Unit Trust ABN 88 452 904 420. Authorised Credit Representative 523233 under Australian Credit Licence 536100.