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With the official cash rate near zero, generating income from traditional fixed income investments is challenging. The low-rate environment and prolonged equity bull run pre-Covid drove many investors to overweight growth assets. However, the market volatility of 2020 highlighted the risks of this approach. It’s time to head back to the drawing board to find a more consistent source of income. Private Debt is a lesser-known sub sector of the fixed income market that has delivered attractive yields with high capital stability through market cycles. Debt ranks ahead of equity in a company’s capital structure, resulting in much-needed downside protection. With less volatility than equities, and low correlation to public markets, private debt provides a compelling alternative source of income in a portfolio.

With higher returns than term deposits, and less risk than hybrids and equities, corporate loans add up to an attractive alternative in a potentially rising interest rates environment.

Andrew Lockhart | 0.25 CE