Investors seeking better rates of return from fixed income


Andrew Lockhart

As investors seek alternative sources of yield, many are recognising that investing in directly originated private loans to Australian companies can generate an important source of alternative income.

In response to this increasing demand, Australia’s leading non-bank corporate lender Metrics Credit Partners (Metrics) has launched a new unlisted private debt fund.

The Metrics Direct Income Fund seeks to provide investors with returns of 3.25% a year above the Reserve Bank of Australia cash rate, which is currently 0.25% (for a total target return of 3.50%). Income is expected be paid to investors monthly.

The fund provides access to the Australian corporate debt market, through an investment exposure to a diversified portfolio of loans to more than 150 Australian companies.

Successive rate cuts mean some investors in cash and Australian government bonds are receiving returns that are below the annual rate of inflation – potentially losing money on every dollar they have invested (in real returns).

Andrew Lockhart, Managing Partner at Metrics, suggested these investors consider an investment providing exposure to corporate loans, which can offer more attractive risk-adjusted returns.

“The Australian corporate loan market is an attractive opportunity that should be considered by investors, seeking to provide superior risk-adjusted returns compared to asset classes such as bonds.

Like all fixed income, it helps to provide portfolio diversification, along with a stable cash yield with low risk of capital loss compared to equities.

This is particularly important for retirees, who generally need to generate regular income to fund their lifestyle needs, while also protecting their capital base,” he said.

Mr Lockhart noted that many equity investors had recently seen their income cut as companies have reduced their dividend payments.

“This fund seeks to provide an alternative source of income for investors,” he said.

The Metrics Direct Income Fund is managed by an experienced and active management team with a proven track record in originating, structuring, negotiating, managing and distributing private debt.

Metrics, established more than seven years ago, has built a highly skilled team expert in providing loans to Australian companies.

“In a low-rate and low-yield environment, the Metrics Direct Income Fund provides a potential investment option for investors – such as retirees and self-managed super funds – to replace their declining dividend and interest returns with an alternative source of income,” Mr Lockhart concluded.

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