Whether you like it or not, your wealth is currently tied, in varying degrees, to the changing attitudes and behaviours of global leaders, geopolitics and financial market instability. It doesn’t have to be. Emerging products offer an alternative plan for your financial future and security.
Presented by Montgomery Investment Management
Of the many concerns confronting investors, “the big one is the unpredictability of the US administration”, says Roger Montgomery, founder of Montgomery Investment Management (MIM).
Stock markets thrive on momentum but falter amid uncertainty — economic surprises, tariff shifts, threats to central bank independence. As Montgomery observes, consecutive double-digit stock market gains are anomalies: "Historically, more than three years in a row is rare; four is exceptional."
Meanwhile, artificial intelligence (AI) is transformational, but Montgomery tempers the enthusiasm, noting, “historically, new technologies that benefit humankind have proven more rewarding for consumers than investors”.
With stock market valuations again stretched, it’s imperative investors decisively rebalance profits into defensive, uncorrelated assets that also offer attractive returns.
There is much to be gained by rebalancing portfolios away from stretched and potentially volatile equities to investments that can produce higher single-digit returns with lower correlation to public markets.
“If markets do correct, you can rebalance back into equities, yielding a potentially attractive, low-volatility return while you wait.” Montgomery notes that he’s not suggesting investors exit equities altogether. “I’m talking about rebalancing back to asset weightings that reflect your risk profile — taking some profits off the table and reallocating them, not selling the farm.”
The background
Significant changes to banking practices were wrought by the Global Financial Crisis (GFC) of 2007–09, which exposed systemic frailties: a housing collapse, imprudent lending and cascading failures that eroded trillions in wealth. The GFC spurred reforms that recalibrated banking incentives, rendering certain loans unappealing for traditional institutions.
Thanks to regulation and capital adequacy requirements, many banks today simply aren’t as interested in lending to small- and medium-sized corporates, as they once were. The resultant vacuum — between corporate borrowing demand and banks' reticence — has been bridged by non-bank players: family offices, private funds and, increasingly, private credit vehicles.
“We’re not talking about riskier lending, we’re talking about lending to those businesses the banks were once happy to lend to.”
Targeting secured loans to growth-oriented Australian businesses and loans with average durations of around four months enables not only a track record of stable returns, but also agility in any future turbulence. Unlike riskier peers extending multi-year loans to property developers, the loan portfolios underlying private credit funds distributed by Montgomery, prioritise capital preservation through broad diversification, high levels of security and the absence of property developer lending.
Changing appetites
Generating returns akin to the stock market’s long-term track record, but without the associated stock market volatility, naturally becomes more appealing as we age and our preference turns away from volatility and towards monthly cash income.
“As investors mature, the tolerance for stock market risk wanes. If there’s an ability to generate a return that potentially matches the stock market, but with less risk, then there’s a growing appetite for that kind of investment,” Montgomery observes.
“There are different private credit funds, just as there are different stocks listed on the stock market. Some are riskier than others. Some, for example, lend to property developers. The funds we offer don’t. Some lend money for three, four or five years. The funds we offer don’t. The average duration of a loan in one of the funds we distribute in Australia is about four months,” he says.
Montgomery believes a generational avalanche is helping to steer more investors towards private credit, cementing its status as an asset class in its own right.
“One of the wholesale funds we distribute has been running for just over eight years. It has paid interest monthly, and it’s never had a negative month. It’s generated about 9.5 per cent per annum since its inception*, which is as good as the S&P/ASX 200 Accumulation Index, if you reinvest the distributions, and it’s achieved that return without the stress-inducing volatility.”
Find out more
Established 15 years ago, MIM is an Australian boutique investment manager serving individuals, families and their advisers. Their goal is to deliver superior long-term investment outcomes for clients and their advisers in the form of capital stability, income and growth.
For more information about private credit, call David Buckland, Chief Executive Officer on (02) 8046 5000 or visit Montgomery Investment Management.
*Performance of the Aura Private Credit Income Fund since inception on 1/8/17 was 9.54% p.a. Net returns after fees and expenses as at 31/8/25 and assumes reinvestment of distributions.
Important information: This is general information and doesn’t take your personal circumstances into account, so seek independent advice before investing. Investing involves risk, including the possible loss of principal. Past performance is not a reliable indicator of future performance. Return of capital or rate of distribution is not guaranteed. Montgomery Investment Management holds AFSL number 354564.
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