Look past property as private credit diversifier: | Australian Markets

New commentary from GSFM subsidiary, Tanarra Credit Partners TCP), has urged traders to contemplate choices different than real estate on the subject of diversifying their private credit publicity.

This comes as real estate publicity continues to climb when additionally contemplating superannuation, in keeping with TCP Managing Director, Peter Szekely.

“Of the $4.2 trillion in superannuation at end 2024, nearly one-third is held in SMSFs. Asset allocation data for the same time period shows property represents 17 per cent of SMSF portfolios on average, only second to Australian shares at 27 per cent,” he mentioned.

“[Diversification] is essential for profitable portfolio construction. This includes spreading publicity throughout industries, borrower varieties, geographies, and belongings with a purpose to mitigate focus risk and guarantee a more steady return.

“A well-diversified portfolio is better positioned to preserve capital and deliver more resilient, consistent returns throughout the economic cycle.”

Szekely mentioned TCP can also be focused on company lending in defensive sectors, offering a diversification and stability edge by investing in sectors together with info technology, health care, childcare, skilled providers, schooling and industrials.

“It might be a popular dinner table conversation topic, but Australians really need to understand their exposure to real estate. An overweight position in property – in either debt or equity – can negatively impact the performance of a portfolio,” Szekely mentioned.

“This is even more important given current geopolitical and economic uncertainties and high market volatility. Investors need to make sure their portfolios are well diversified and positioned away from those industries most likely to come under pressure.”

Szekely inspired traders to stay conscious of ongoing market dangers on the subject of property investment, significantly contemplating the impacts of the construction sector on valuations and total volatility.

“For example, the construction industry is presently dealing with rising material costs and skilled labour shortages which, combined with fixed price contracts, puts pressure on cashflow,” Szekely mentioned.