Overview

  • Foresight knows from reviewing long-standing private debt managers that their investor base is extremely loyal, generally wealthy and largely retired. The asset class is growing strongly, mostly by word of mouth. Semi-permanent capital, in evergreen funds with periodic liquidity (monthly or quarterly) that are not subject to the vagaries of the listed market, must be the ‘Holy Grail’ for any fund manager. So it’s hardly surprising that a host of traditional fund managers are entering the Australian private debt space, including ASX-listed hitherto solely equities managers.

 

  • The same 2 key characteristics noted above – permanency of capital and suitability for retirees – have also been driving global private debt and equity markets. The effect has been transformative for all participants and, most specifically, has impacted the acquisitive strategy of large US and UK annuities and retirement solutions providers. This has been driven by both the search for permanent capital and the ability to use (and fund) their private debt offerings as an integral component in a broader retirement portfolio.

 

  • While the specifics are different in Australia, the dynamics driving the growth of private debt are the same, both in terms of investor uptake and the proliferation of investment vehicles and participants. The shortcomings of the traditional 60/40 balanced portfolio have become clear for all to see, and there is a growing recognition that private debt can suitably meet the needs of investors in the latter stage of their investment lifecycles. This is particularly relevant for the baby boomers (arguably the most attractive investor cohort) in Australia.

 

  • This paper explores the characteristics of private debt as a retirement solution and its semi-permanent nature. We explore the rationale behind existing fund managers entering the Australian private debt segment and the use and funding of private debt by retirement solutions providers. There are few certainties in investment markets, but it’s clear the megatrend growth of the Australian private debt sector and the continued proliferation of innovative investment vehicles and providers are likely to continue in the long term.
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