Australian Superfunds: Boosting Private Debt Investment

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Australian Superfunds are driving private debt investment and boosting economic growth.

The Australian private debt market grew exponentially in 2021, with Ernst and Young’s annual paper estimating its size to be a record AU$133 billion. This figure is increasing by an impressive 21% yearly! Despite this achievement, the global private debt market still towers over US$1.2 trillion – growing at 13.5% each year for the past ten years.

Why Australian Superfunds are Turning to Private Debt

In 2022, some of Australia’s most significant super funds paid attention to the attractive risk-adjusted returns available with private debt as an alternative asset class. However, there is still more progress to be made in this sector. This article looks closely at why and how rapidly Australian superfunds have boosted their exposure to the private debt over the last year.

One of the primary reasons for superfunds’ interest in private debt is its attractive risk-adjusted returns. Private debt can provide an attractive alternative to traditional investments, especially when there is a lack of liquidity or access to capital. Private debt also offers low volatility and high yields compared with public markets – making it an attractive option for long-term investors.

The second and most crucial factor driving the growth of private debt investment is its potential to provide accurate, tangible social benefits. By investing in distressed assets, superfunds can help inject capital into markets hit hardest by recent economic conditions. This helps to stimulate growth and create jobs in those sectors – a win-win for both superfunds and local economies.

“Australian super funds are now firmly established players in the private debt investment space,” said Terry Kaye, managing director of Debt Repayment Solutions. “This trend will likely continue as Australian superfunds make more strategic investments in private debt – looking for high-yielding assets with tangible social benefit.”

Since the start of the year, Australian superfunds have already committed AU$ 4 billion to private debt investments. This figure is expected to grow further over 2023 – especially with more funds looking at alternative asset classes like private debt to diversify their portfolios and increase their returns.

Australian superfunds are proving to be a significant force in the private debt investment space, providing economic and social benefits as they continue to drive growth across the country. With their commitment to investing in alternative asset classes and rising exposure to private debt, these funds are paving the way for a more sustainable future.

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