Why alternative investments deserve a place in your portfolio

Chris Paton, chief investment officer at La Trobe Financial, lifts the lid on alternative assets and explains why they can offer real value to retirees.

Many investors are unsure about alternative investments and what they involve.

It can be surprising to learn that any investment beyond cash, bonds, and equities is technically classified as 'alternative'. This even includes real property.

For those in or planning for retirement, it can make good financial sense to include an allocation towards alternative assets within your investment portfolio.

They offer a simple way to boost diversification, which can reduce risk while smoothing out returns - qualities highly valued by retirement-focused investors who often rely on their portfolio as a key source of income.

This aspect of risk reduction is especially relevant right now.

How the economy is faring

Today's economic and investment environment may appear to be steeped in uncertainty.

Without doubt, the US tariffs announced in early April rattled a number of asset markets, initially driving falls in equities, bond yields and many commodity prices.

At the time of writing, these impacts have largely unwound. According to the Reserve Bank of Australia (RBA) at its May 2025 monetary policy meeting, pricing in many global financial markets has only modestly changed relative to pre-tariff levels.

Closer to home, the Australian economy is holding up well.

Inflation has eased to around 2.1%, according to the March quarter Consumer Price Index data from the Australian Bureau of Statistics, which is well within the RBA's target range of 2-3%.

Unemployment remains low at 4.1%, the ABS reported in May, and consumer sentiment is rising.

And while the Aussie economy grew by just 0.2% in the first quarter of 2025, Oxford Economics predicts growth of 1.5% for the full year. While it's not high, its progress in the right direction.

So, where do alternative investments fit into this picture?

Let's take a closer look.

Opportunities for greater diversity, regular returns

Australian retirement-focused investors traditionally favour cash and Australian shares for the regular income they can provide.

However, falling interest rates could mean some belt-tightening for retirees who rely on 'safe' cash-based investments to support their lifestyle.

In terms of shares, Australian equities have performed well over the year to date, gaining just over 4% (to late June).

The downside is that fewer than 2,000 entities are listed on the ASX, and this number is in decline. Over the last two years, this number of listed companies has fallen by 145 - the largest two-year drop since the recession in the early 1990s. So, investors may need to look much harder for opportunities within the equities market.

This is a trend being seen globally.

ASIC research confirms a "very clear structural decline" in the number of listed companies in the US since the late 1990s. It's a pattern being repeated in the UK and other European markets.

A key driver behind falling numbers of public companies is the sheer cost of listing on public markets.

As a result, more companies are turning to private markets, including private credit - that is, non-bank lending - as a means of raising funds.

This has fuelled the growth of private credit as an attractive, alternative asset class.

The RBA reports the Australian market for [corporate] private credit is worth $188 billion. Globally, the market is valued at $3.2 trillion with North America accounting for around 70% of the market.

What's interesting, is that while President Trump's tariffs may be driving volatility in equity markets, the intent of his policy is clear - rebuilding the middle market of the US economy.

This is further underpinning demand for private credit.

Private credit brings plenty to retirement portfolios

For individual investors, private credit offers a way to reap the rewards of being a lender.

Investors receive regular income, often paid monthly in the case of La Trobe Financial's private credit investments.

But instead of investing in a single borrower, private credit can allow investors to pool their capital in a managed fund. This spreads their investment across multiple loans, sectors, and even geographies - providing that all-important diversification.

Better still, private credit is not correlated to traditional asset classes such as listed shares. So, it can deliver equity-like returns often with lower volatility.

Adding up these qualities, it's easy to see why private credit is appealing to retirement focused investors.

What to consider when investing in private credit

As demand for private credit grows, we are seeing an increase in the options available for investors.

But as with any managed asset, it pays to invest in experience.

La Trobe Financial has been delivering private credit investments for more than 70 years - through good economic times, and less certain times.

One aspect we pride ourselves on is our transparency. We publish monthly reports on our website that allow our investors to review how their money is invested, at any time.

When it comes to retirement savings, we believe this transparency is very reassuring.

We also understand the importance of diversity.

That's why La Trobe Financial doesn't just focus on the Australian market.

We also offer exposure to US corporate private credit, and our newly ASX-listed La Trobe Private Credit Fund (ASX: LF1) delivers the benefit of two complementary best-in-class strategies, combining the regular income of La Trobe Financial's 12 Month Term Account (Australia's most awarded private credit fund) with an opportunity to tap into the mega trend of the US rebuilding its middle market. LF1 offers the additional benefit of daily trading on the ASX.^{^}

The bottom line is that alternative investments are worth a closer look for all Australians. For retirees, the diversity, stability and regular income they offer can tick plenty of boxes.

^Units can be bought and sold on the ASX during trading hours, subject to their being sufficient supply and demand and the units not being suspended from trading.

The information above is of a general nature and does not take into account the investment objectives, financial situation, taxation situation or needs of any particular investor.

La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence No. 222213 is the responsible entity of the La Trobe Australian Credit Fund ARSN 088 178 321, the La Trobe US Private Credit Fund ARSN 677 174 382 and the La Trobe Private Credit Fund ARSN 686 964 312 (ASX:LF1). It is important that you consider the relevant Product Disclosure Statement (PDS) before deciding whether to invest or continue to invest in any of the funds. The PDSs and Target Market Determinations are available on La Trobe Financial's website.  

To view La Trobe's Awards please visit the Awards and Ratings page on La Trobe Financial's website.

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