This is what 2025 could bring for Australian investors

As we prepare to flip the calendar on 2024, we look back over the year that was and offer insights into 2025.

Every year dishes up surprises and challenges, and 2024 has been no different.

As Australia treads a slow path to economic recovery, the Reserve Bank of Australia (RBA) cash rate has remained stable at 4.35% throughout the year. Inflation is slowly meandering its way downwards, and property markets have seen diverging paces of growth across our capital cities as they pass their cyclical peaks.

Throughout it all, private credit - in other words, non-bank lending - has continued to grow.

This has been part of an ongoing trend since the global financial crisis of 2008/09, when regulators imposed ever increasing restrictions on bank lending. As banks have progressively surrendered market share, the resulting gap in the supply of credit has been filled by non-bank lenders.

For La Trobe Financial in particular, 2024 has been a milestone year.

More than 9700 investors joined us this year, bringing our investor numbers to more than 100,000 and lifting our assets under management to over $20 billion.*

And spurred on by investor demand, at the end of 2023 we launched our La Trobe Global Asset Management strategy, headlined by our new La Trobe US Private Credit Fund.

While all asset markets have reacted differently to the effects of a slowing global economy, high inflation and increased uncertainty, a report by EY notes that private markets have proved remarkably resilient to these challenges.

This has certainly been the case for La Trobe Financial's investors, with our flagship 12 Month Term Account returning 6.75% per annum net of fees.

What may lie ahead in 2025?

How might the next 12 months shape up?

In the residential property market, the pace of price growth is easing as buyers face reduced borrowing power (thanks to high interest rates) and affordability challenges.

While there is a growing expectation of interest rates starting to fall, possibly by early 2025, the RBA has made it clear that it plans to "keep rates restrictive for the time being", and it's "not ruling anything in or out".

In terms of equity markets, the return of Donald Trump to the White House, and the prospect of the US imposing tariffs could, broadly speaking, create uncertainty for number of sectors of the Aussie sharemarket.

Of course, there is always uncertainty about the extent to which a newly elected (or re-elected) leader will implement their policy promises.

La Trobe Financial overcomes this uncertainty by focusing on long-term fundamentals. It's a strategy that has allowed us to build the wealth of our investors for over seven decades.

Yes, the new Republican administration could bring a sea change across the US economic landscape. But we believe several key mega-trends will continue to drive opportunities in the private credit market in 2025 regardless of who's in charge at the White House.

Mega-trends will drive private credit

The first such trend is digitalisation. The tech revolution is upon us, and it will see growing numbers of companies seek funding to digitise their businesses and improve productivity.

A second trend is deglobalisation - the onshoring of critical industries. This is expected to fuel significant demand for private credit, with investment spending expected to reach $US1 trillion globally over the next decade. The Trump administration, with its Make America Great Again mandate, is likely to support this growth, as will Australia's own Future Made in Australia initiative.

As I've mentioned already, a third mega-trend - debanking - the move away from big banks in favour of private credit providers has been underway for some time. And demand for private credit is expected to keep growing as companies remain private for longer.

Another noteworthy trend is decarbonisation. President-elect Trump may be a supporter of non-renewables, however the move away from fossil fuels is happening far beyond US borders. Oxford Economics estimates that the global transition to a net zero by 2050 will create new industries worth $US10.3 trillion across the international economy.

What it all means for investors

With the US election settled, Australians will head to the polls in 2025.

It's important not to let an election derail your plans - historically, election outcomes don't drive market returns over the long run.

What fuels success for investors is having a diversified portfolio spread across quality assets managed by proven and experienced providers. Solid fundamentals perform across the full economic cycle.

Private credit has a valuable role to play in a diversified portfolio.

As investors look towards the new year, the diversification, stability, potential for healthy yields, and regular income can be exceptionally rewarding for investors weary of uncertainty.

*Total investors is calculated by adding all individual & joint investors (which includes some investors with a current zero balance in their account) to reasonable estimates of investors investing via trusts or SMSFs.

The variable rates of return are current at November 1, 2024. The rates of return are reviewed and determined monthly, are not guaranteed, and may be lower than expected. The rates of return are determined by the future revenue of the Credit Fund, and distributions for any given month are paid within 14 days after month end.

An investment in the Credit Fund is not a bank deposit, and investors risk losing some or all of their principal investment. Past performance is not a reliable indicator of future performance. Withdrawal rights are subject to liquidity and may be delayed or suspended.

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.

Any financial product advice is general only and has been prepared without considering your objectives, financial situation or needs. You should, before investing or continuing to invest in the La Trobe Australian Credit Fund & La Trobe US Private Credit Fund, consider the appropriateness of the advice having regard to your objectives, financial situation or needs and obtain and consider the relevant Product Disclosure Statement for the fund.

Past Performance is not a reliable indicator of future performance.

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