Low cash rate drives high demand for alternative investable asset class
Gavin Solsky
Specialist fixed income asset manager, Global Credit Investments (GCI) says Australian retail investor portfolios weighted heavily towards cash and domestic equities have foregone significant, stable income benefits of alternative, prime-grade consumer credit markets.
“The continuation of poor yields from historically low global cash rates and volatile listed company dividends has applied ongoing pressure on Australian investors and their advisers to find reliable income within robust risk and capital focus parameters,” says GCI co-founder Gavin Solsky.
GCI’s recently launched Diversified Income Fund has garnered strong and growing investor interest with its investment target of high, single-digit income and institutional grade investment process, purpose-built to preserve investor capital through proprietary data analysis, active investment selection and asset diversification.
The Fund is Australia’s first pooled investment vehicle targeting predictable income returns from prime credit, sourced via global Marketplace Lending (MPL). It invests in FICO-rated*, short-term consumer credit, with zero leverage.
GCI co-founder and Chairman Steven Sher said consumer credit originated by MPL platforms has provided stable returns with lower volatility, compared with government and corporate bonds, US stocks and Australian domestic equities.
“Over the eight years between January 2008 and March 2016, our analysis shows the asset class delivered an annualised return of 6.04 per cent, which compares favourably to 7.26 per cent from US stocks (S&P 500 Total Return Index) and significantly more than comparable Investment Grade and High Yield Corporate debt.
“However, were you invested in the S&P 500 over that time, it would have been a volatile ride, experiencing in total 38 months’ of negative return. By contrast, consumer credit originated via MPL platforms had zero monthly negative returns, and also produced a cumulative gain of over 60 per cent for the same 8-year period,” Mr Sher said.
The GCI Diversified Income Fund is open to sophisticated (high net worth) and institutional investors and targets a high single digit pre-tax return to investors after fees, denominated in US dollars.
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