With the recent 25 basis point drop in the cash rate it has taken the rate to a historical low of 1.25% and there is a general opinion in the marketplace that there may even be a further drop in the future. This view is driven by several factors, particularly the fact that with inflation at 1.75% it remains below the Reserve Bank target of 2-3 percent. The RBA expects it to remain at around the 2 level for the next 18 months and then only go a little higher after 2020.
Australian long-term bond yields are at historically low levels and bank deposit rates and term deposit rates are in
the 2.2%-2.85% range.
This means that investors, budgeting on the return from invested savings contributing to their disposable incomes, may need to kerb their spending or look for alternative, higher yielding options. This will take some investors a little further up the risk reward matrix where they would need to possibly consider different banks, real estate, higher-yielding property funds or infrastructure funds.
Credit funds are a potential option for investors to consider. Lauders Developments Credit Fund (Fund) for example provides opportunities for sophisticated investors to invest in debt related to Australian broad acre land project. The Fund’s Information Memorandum (IM) will detail the target return that investors can expect and will also outline the types of projects or investments in which the fund can invest. Participants in the Fund have enjoyed a 10%pa return on their investments over the past few years.
Further information on our credit can be found at lauders.com.au/lauders-capital/