The Australian private debt market continues its solid streak into 2023

Graham Lees

The continued growth of the Australian private debt market presents a compelling opportunity for investors, according to Tanarra Credit Partners managing director, Graham Lees.

Assets under management for the global private debt market are in excess of US$1 trillion, and this number is set to grow as banks continue to pull back from financing.

However, the Australian private credit market is relatively under-penetrated, which represents a significant growth runway, Mr Lees says.

“Investing in Australian private debt provides stable cash income with an attractive risk-return profile, strong investor protections and a low correlation to other asset classes.

“Private credit at floating rates offers the best opportunity for investors, as it provides a natural hedge against inflation and interest rate movements.”

He says despite the headwinds facing the global economy in 2023, Australia’s outlook remains relatively positive, with growth projected at 1.6 per cent, underpinned by population growth, and strong mining, tech and services sectors, compared to other developed economies – which are projected to grow at approximately 1.2 per cent on average.

He adds that alternative investments help diversify portfolio risk and generate returns at a time when traditional assets are underperforming.

“This year we have started to see many more investors revisiting their investment approach and moving away from traditional strategies which have performed poorly during the recent market volatility.

“One of the alternative asset classes which is benefiting from this shift is private credit – it is an effective and defensive investment strategy to have in place during an uncertain economic environment.”

Aside from attractive returns and diversification, Mr Lees explains that private debt also provides investors with access to institutional-quality investments which may not be available to them otherwise, as well as offering potential downside protection and lower volatility.

“Over the past month we have seen interest in private debt start to really pick up, with more investors interested in investing into our fund, and we believe the remainder of this and next year will see that trend continue,” says Mr Lees.

Tanarra Credit Partners formed a partnership late last year with GSFM to provide retail investors in Australia with access to Australian private debt assets.