Blog: Where did all the yield go?

Why it’s time to look to alternative assets

Most investors have one common goal: to achieve a steady and reliable rate of return with low risk to their principal. And at a time of low returns, they’re turning to alternative assets to find yield.

Investment is a careful balancing game between risk and return – and for some, there’s a lot at stake. Australians currently have in excess of $2 trillion in investments in superannuation alone.

Australia is a nation of investors, with nearly half the population (46%) holding investments outside of their home and super.[1] And as the next generation of investors begin to plan for retirement, they’re intensifying their search for new options.

Between the end of 2020 and 2025, assets under management in global Private Debt are expected to rise 72%, far outpacing global GDP.[2]

Within private debt, there’s a sub-class focused purely on 1st mortgage-backed real estate debt. Private real estate debt provides loans to commercial borrowers who require funds – with a first mortgage as security. Investors effectively become the bank [NH1] and receive regular income in the form of interest payments.

With solid returns and low-risk profile, private real estate debt as an asset class holds a strong appeal for investors. And now, it’s no longer a case of having to be ‘invited’ into the deal – platforms like AltX are democratising access for wholesale investors, with a minimum investment of just $50,000.

It’s also a compelling alternative to traditional fixed-income options. With the ten-year yield on Australian Government Bonds just 1.57%, and the official cash rate inching closer to negative returns, private real estate debt rates of 4% to 8% look pretty attractive. And the deals are typically short-term – on average 12 to 18 months.

Sure, you might be able to get those returns (or more) in equities. But if we’ve learned anything in the past year, it’s that the stock markets are extremely volatile. Pricing is subject to market, economic and geographical conditions, putting your capital at risk.

And at AltX, we only offer deals to our investors if we feel confident enough to put our own money into them as well.

[1] ASX Australian Investor Study, 2020

[2] Prequn, Future of Alternatives 2025: Preqin Forecasts Alternative AUM Growth of 9.8% through to 2025, David Lowery, 4 November 2020

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Bondi Junction, NSW, 2022
Phone: 1300 991 380

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