Client case study: a technical blog on private credit

The brief: Convert a client’s latest investment update webinar into an engaging, topical blog article.

The challenge: The subject matter was wide-ranging and complex, often using technical language. However, there were fascinating nuggets of information from which to build more concise and engaging blog narrative.

The result: I quickly turned around a thoughtful article distilling 2-3 key themes from the webinar, with a punchy hook and clearly calling out the benefits to the consumer. A happy client!

The income play built for uncertain markets.

Names and products have been anonymised.

Rising interest rates. Persistent inflation. Growing uncertainty in global credit markets. For many investors, these signals point to increased risk.

But for the [ABC Fund], today’s market conditions are a source of opportunity. In fact, the same forces creating volatility are helping to reinforce the fund’s ability to deliver consistent income and protect capital.

Why higher interest rates can work in the Fund’s favour.

A common assumption I hear from investors today is that when interest rates rise, real estate suffers.

That may hold true for equity investors, as property values come under pressure. But the [ABC Fund] sits in the credit layer of the capital stack, where the dynamics are fundamentally different. Due to the fund’s set up, investors have a significant capital buffer protecting their investment (more on that later).

So how can rising rates benefit the Fund’s investors? Firstly, the fund’s portfolio is 100% floating rates, with loans repriced around every 30 days. That means as interest rates increase, this uplift flows directly through to income distributions to our investors.

Secondly, higher rates tend to take liquidity out of the market. Stretched lenders are forced to pull back, creating a market dislocation and opening up opportunities for lenders like us who are coming from a position of strength. So rather than making our job harder, higher rates actually improve the quality of opportunities we see. For example, during a period of thirteen interest rate hikes between 2021 and 2024, the total loans we deployed grew by around 30% per year.

Thirdly, there is a structural tailwind at play within residential property. As cost-of -living pressures rise and borrowing capacity tightens, demand shifts towards more affordable housing – particularly apartments. The average Aussie household is already taking 22% longer to save for a house deposit compared to 20 years ago – and that’s before these latest headwinds set in. The [ABC Fund] is heavily positioned in the residential apartment sector as we have strong conviction in that part of the market.

Crucially, these positive outcomes only become possible if a portfolio can absorb rate pressure. We’ve built the Fund’s loan book with this environment in mind, invasively assessing each and every borrower for their ability to absorb higher rates and withstand downside scenarios. Every investment we make is stress tested at the outset – meaning the current environment is something the portfolio has been deliberately designed to handle.

Built to protect capital – and deliver consistent income.

In uncertain markets, resilience matters more than ever.

The Fund’s track record reflects our clear focus on capital preservation and reliable income. Since its launch in 2018, the fund has recorded no impairments or workouts. Plus, it’s consistently delivered monthly income to investors – with 7.14% distributed in the past twelve months and 7.40% p.a. since launch.

This consistency is underpinned by a deliberately defensive portfolio:

• 95% of investments are in senior loans

• the average loan-to-value ratio (LTV) is around 65%

• the fund contains 58 loans, providing good diversification while still allowing thorough oversight

• Around 70% of loans are in the residential and living sectors.

This structure provides a meaningful buffer against market volatility. At a 65% LTV, property values would need to decline by around 35% before investor capital is materially at risk – and even more if the fund is trading below its net asset value.

Underpinning this is our highly rigorous due diligence framework. When we underwrite loans, we don’t assume benign conditions, we stress test everything: higher rates, slower sales, cost pressures and more. These are all scenarios we sensitise for both before we invest and right throughout the lifecycle of a loan.

So, when I look at what’s playing out today, it’s very much within the range of outcomes we’ve already planned for. The result is a portfolio that remains healthy, even as conditions become more challenging.

Tighter liquidity can provide opportunities for disciplined lenders.

There’s been a lot of commentary recently around liquidity in private credit markets, particularly offshore.

However, much of this pressure is being driven by factors that don’t affect [our company] – including exposure to sectors such as US software lending.

Locally, there is some noise around potential redemption pressures across parts of the market. But for [the Fund], this dynamic may actually prove beneficial.

With a predominantly institutional investor base and therefore minimal exposure to redemption risk, [our company] has a stable pool of capital. This allows us to continue deploying capital even as others are forced to step back.

What makes [the Fund] different?

Not all private credit strategies are positioned to benefit from today’s conditions. As liquidity tightens, success is increasingly driven by access, discipline and portfolio strength.

[Our company] possesses several structural advantages in this environment.

• A predominantly institutional capital base provides stability, allowing the Fund to deploy capital consistently rather than react to redemption pressures.

• Long-standing borrower relationships and deep origination networks enable access to high-quality opportunities, even as competitors pull back.

• A disciplined focus on senior lending, combined with rigorous underwriting and active portfolio management, enables the fund to prioritise capital preservation while selectively capturing improved risk-adjusted returns.

We’ve designed [the Fund] to be resilient enough to not only withstand, but benefit from periods of uncertainty. The conditions we’re seeing today are exactly the sort of scenarios we built this portfolio for.