For the best part of a decade now, income hungry investors have battled to find a decent yield. Thankfully, the capital gains from falling rates have offset the lack of income. But with rates around the world close to zero, it seems there’s limited room left for more capital gains.
Let me share an example. According to the ATO, the average super balance for a 65-74-year-old man is $446,800. Meanwhile, the average super balance for a 65-74-year-old woman is $378,600. So, let’s say our couple has a combined super balance of $825,200. Quite a healthy nest-egg. But with term deposit rates at around 1.75%, that will produce just $14,441 of income over the course of a year.
It should come as no surprise then that private credit, with its chunky yields, has seen a boom in popularity in recent times. Once purely the domain of institutional investors, these products are increasingly available to retail investors through listed structures on the ASX. Offering returns in the mid-to-high single digits, they attract a premium for the higher risk nature, while generating additional fees from deal origination.
Andrew Lockhart, Managing Partner of Metrics Credit Partners, has been a pioneer in this sub-sector in Australia. He worked for decades at a Big Bank on these deals, and then nine years ago decided to start Metrics with his business partners. In this week’s episode of The Rules of Investing, we discuss how the GFC shaped his investment philosophy, how Australia's big banks have changed the way they’re funded, and the sectors he'd be avoiding if the market closed for 5 years.
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The theme to dominate this decade in markets
How an everyday investor competes with the pros
Two consumer stocks making it big overseas
50th episode special with Hamish Douglass
Nailing your asset allocation
How to pick stocks like a pro
Investing: A how to guide (Part 1)
Tagliaferro: How the '87 crash shaped my philosophy
Catherine Allfrey: Look over the horizon
The developed world is on the brink of crisis
The importance of saying "no"
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How to pick growth stocks that will keep on winning
Montgomery: The economics of enough
The five pillars of a quality stock
The hunt for predictable cash flows
Abnormal returns
Skamvougeras: Forgotten opportunities
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