Four important trends investors can't afford to ignore

There are four major investment themes set to drive private investment markets.

America has re-elected Donald Trump, and after months of observing political campaigning in the US, it can seem to Australians that getting either side of politics in the US to agree on anything is impossible.

But four key themes are set to drive the next generation of private asset investment, and both sides of politics are on board in their own way.

Investment markets thrive on opportunities, and right now, significant generational investment trends are underway.

At La Trobe Financial, we have dubbed these opportunities the Four Ds. Together, they will act as tailwinds for investment opportunities, with the potential set to shape outcomes for the next generation.

Let's take a closer look at the four themes that all investors need to know about.

1. Digitalisation

Digitisation has transformed many elements of our world, and the rapid pace of change presents a diverse landscape of investment opportunities.

Our own Department of Foreign Affairs and Trade notes that digitalisation isn't just about big business. All businesses have much to gain by investing in digital tools to streamline back-end processes, increase their online presence and transform how goods and services are delivered.

The rewards are exceptional. Highly digitally engaged businesses earn 60% more revenue per employee and grow 28% faster than businesses with poor digital engagement.

With spending on digital transformation forecast to reach almost $US4 trillion in 2027, investors shouldn't overlook opportunities to be part of this transformative journey.

2. Decarbonisation

The International Energy Agency reports that to reach net zero emissions by 2050, annual spending on clean energy investment worldwide will need to more than triple by 2030 to around $US 4 trillion.

This spending isn't just good for the planet. It will create millions of new jobs, and significantly lift global economic growth.

3. Deglobalisation

There are strong signals that the era of globalisation is coming to an end.

Barclays Investment Bank notes that in response to COVID-19, conflict in Ukraine, and climate change, governments and global companies are seeking security and resilience over the benefits of global value chains.

The process of countries and companies onshoring critical industries is expected to drive $US1 trillion of investment spending over the next 10 years.

4. De-banking

The private credit market - lending by non-bank financial institutions - has grown rapidly over the past two decades, providing an alternative source of financing for businesses.

Reserve Bank of Australia (RBA) data shows the private credit market locally to be growing rapidly.

Globally, private credit assets have quadrupled over the past decade to $US2.1 trillion in 2023. North America accounts for around 70% of the global private credit market, while Europe represents about one-quarter.

De-banking has also been fuelled by investor demand. As the RBA notes, private credit "has an attractive risk-return trade-off" and "has exhibited low volatility relative to publicly traded assets."

How investors can get involved

These are global trends. But as part of a global economy, we can all stand to benefit from these tailwinds.

What's especially exciting is that these growth drivers align with the needs of investors. The Four Ds are long-term trends. They are unlikely to produce assets with wild price fluctuations. And they support the generation of low-volatility income.

For retail investors, the question is how to get involved.

One simple solution is through private credit funds. Quality companies are tapping into private markets for capital.  The financial and regulatory environment will support this trend, driving more and more capital towards private credit.

For over 70 years, La Trobe Financial has been managing carefully selected investment portfolios sourced from the Australian real estate private credit market. More recently, in response to investor demand, we launched our La Trobe US Private Credit Fund, providing everyday Australian investors with defensive exposure to U.S. mid-market private credit.

From our flagship 12 Month Term Account to our US Private Credit Fund, La Trobe Financial is providing everyday Australian investors the opportunity to participate in the big investment trends of the coming generation all fuelled by the Four Ds - opportunities with the power to reshape markets well into the future.

Any advice is general and does not consider your personal circumstances. Past Performance is not a reliable indicator of future performance. 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 and the La Trobe US Private Credit Fund ARSN 677 174 382. It is important that you consider the relevant Product Disclosure Statement (PDS) before deciding whether to invest or continue to invest in the fund. The PDSs and Target Market Determinations are available on the La Trobe Financial website.

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