Why it's time to take stock of your portfolio
By Chris Paton
Now is the time to get your portfolio into shape for 2025 says Chris Paton, Senior Vice President and Chief Investment Officer at La Trobe Financial.
The past 12 months have flown past, and before we know it, the Christmas rush will be upon us.
That's why it can be worth taking stock of your investment portfolio now, and plan for the year ahead.
Here are a few pointers to think about.
1. Could you do with extra income?
Australians are facing a cost of living crunch. The need for extra income is seeing 961,000 people work multiple jobs. This is 25% higher than in 2021, as Australians adjust to living with higher and sticky inflation.
But when it comes to earning more, your investments can (and arguably should) do a lot of heavy lifting.
For regular income, it's worth a look at private credit. Private Credit refers to investments that offer access to lending by non-bank financial institutions, and it is a rapidly growing market.
La Trobe Financial has been a leading manager of Australian Real Estate Private Credit for more than 70 years. And it is an asset class that can generate healthy, regular returns.
As a guide, La Trobe Financial's 12 Month Term Account is currently generating variable returns of 6.75%* net of fees. Better still, the returns are paid monthly into your bank account or reinvested. That's extra money to live on without any extra effort.
2. Does your portfolio have ballast?
As investors, it can seem as though we are facing a wall of worry.
The U.S. presidential elections, conflict in the Middle East and the situation in Ukraine are all creating uncertainty, and this has the potential to increase volatility in equity markets.
No investor enjoys seeing their portfolio experience wild swings in value.
The beauty of private credit is that returns are not linked to equity markets, so are typically less volatile.
In this way, private credit can act as ballast to a portfolio, bringing about more stable returns.
La Trobe Financial's Australian Credit Fund, for example, is backed predominately by residentially-secured loans combined with some exposure to other assets including non-residential assets such as commercial property loans.
With a track record of generating healthy, low-volatility yields, our portfolio accounts can help your wealth maintain a steady course regardless of what's happening in equity markets.
3. Is your portfolio keeping up with change?
Our world is changing. In the U.S., the Inflation Reduction Act has pledged over half a trillion US dollars for investment into infrastructure, energy and technology.
In Australia, we have our homegrown $22.7 billion 'A future Made in Australia' strategy.
More broadly, new investment opportunities are being shaped by the four Ds:
- Digitalisation, with the building of data centres and related infrastructure;
- Decarbonisation, as economies build cleaner, resilient energy supplies;
- Deglobalisation as companies bring critical industries onshore; and
- De-banking as more of the world's corporations turn to non-bank lenders for funding.
These generational trends offer exciting opportunities for private credit investments.
4. Are you relying on equities?
There is no doubt that shares can offer pluses to investors.
But an extraordinary phenomenon has been taking place on sharemarkets globally that many investors are unaware of.
The global supply of equities is shrinking as fewer companies choose to list on stock markets.
The World Economic Forum (WEF) says there has been a $US120 billion ($179 billion) reduction in public equities this year, the third consecutive year of decline.
According to the WEF, this shift means investors "have fewer options to choose from, and risk losing out on opportunities to invest in some of the world's most innovative and fastest growing companies".
One factor driving shrinkage in sharemarkets is the much larger pool of alternatives, including private credit (remember, that's non-bank lending), that company executives can turn to when they need capital.
5. Are you missing out on global opportunities?
Yes, we all call Australia 'home'. But diversification is a cornerstone of successful investing.
This means spreading your money across different investments, industries, and importantly, across different locations.
La Trobe Financial recognises the value of geographic diversification. So do our 100,000-plus investors^.
In 2023, we responded to investor demand with the launch of our Global Asset Management series. It's letting us bring a world of opportunities to Australian investors.
In particular, the La Trobe US Private Credit Fund is making Private Credit simple and accessible for everyday Australian investors.It offers access to a defensive exposure of U.S. mid-market private credit. It aims to deliver a low-volatility, premium monthly income stream, quarterly liquidity# with investor capital hedged. And its investment portfolio is designed to perform across all economic and market cycles: high-quality assets, within a highly diversified portfolio and a strong margin for safety.
Our approach to U.S. mid-market private credit is deliberately conservative, focusing on high-quality companies with strong stable free cash flows, while avoiding cyclical sectors. That for us is how we can extract value for investors.
It's a hassle-free way to give your portfolio international exposure without the volatility that can go hand-in-hand with global equity markets.
Long story short, private credit has the potential to benefit your portfolio in a number of ways - and help set you up for a prosperous 2025. Why not make plans to reap those rewards now?
*The variable rate of return is current at April 1, 2024. The rate of return is reviewed and determined monthly, is not guaranteed, and may be lower than expected. The rate of return is determined by the future revenue of the fund, and distributions for any given month are paid within 14 days after month end. An investment in the La Trobe Australian 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.
#A quarterly limit of 5% of the total value of the issued Class B Units applies to redemption requests. See the PDS for more details. ^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 platform, trusts or SMSFs.
Any advice is general and does not consider your personal circumstances.
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