Investors in cash and Australian government bonds who are worried to lose money due to successive rate cuts should consider investment exposures to corporate loans as it had more attractive risk-adjusted returns, according to Metrics Credit Partners.
According to Metrics’ Andrew Lockhart, the Australian corporate loan market still offered attractive returns which similarly to all fixed income provided additional portfolio diversification which was particularly important for retirees who need to generate regular income while protecting their capital base at the same time.
Lockhart stressed that many equity investors had recently experienced income cuts as companies were reducing their dividend payments, forcing them to seek an alternative source of income.
At the same time, investing in directly originated private loans to Australian companies gained recognition among some investors.
“In a low-rate and low-yield environment, the Metrics Direct Income Fund provides a potential investment option for investors – such as retirees and self-managed super funds – to replace their declining dividend and interest returns with an alternative source of income,” Lockhart said.