Private Credit for Long-Term Retirement Wealth Building: An Australian Perspective with COI Capital Management

For discerning Australian investors focused on long-term wealth accumulation and robust retirement planning, the strategic inclusion of private credit within a diversified portfolio is becoming increasingly compelling. Here at COI Capital Management, we articulate how this asset class, particularly within the nuanced Australian market, can serve as a powerful tool for generating attractive risk-adjusted returns and fostering sustained capital growth.

The Expanding Australian Private Credit Landscape

The Australian private credit market has witnessed substantial growth, reflecting a global trend of financial intermediation shifting from traditional banking channels to non-bank lenders. The estimated size of the private debt market in Australia reached approximately $205 billion in 2024, with a significant 17% (around $85 billion) allocated to commercial real estate loans. Projections indicate continued robust expansion, with some experts forecasting the Australian private credit market to grow by 1.5x over the next 3-4 years. This growth is fuelled by several factors, including tighter bank lending conditions and a strong borrower appetite for flexible, tailored financing solutions – a space where COI Capital Management excels.

Technical Attributes of Private Credit for Wealth Building

Private credit offers distinct technical characteristics that contribute to its appeal for long-term wealth building:

• Enhanced Yields and Illiquidity Premium: In an environment where traditional fixed income yields have been suppressed, private credit generally provides a significant yield premium. This premium, often in the range of 8% to 10% annualised yields for senior secured strategies (compared to, for example, 4% to 5% dividend income from equities), compensates for the inherent illiquidity of these investments.

  The bespoke nature of private debt, often involving complex structuring and direct negotiation, further contributes to this "complexity premium." COI Capital Management's focused approach to mid-market commercial real estate debt and equity allows us to capitalise on these premiums.

  
  

• Low Correlation and Diversification: A key tenet of long-term wealth building is portfolio diversification. Private credit typically exhibits a low correlation with public equity and bond markets. This means its performance is less susceptible to the short-term volatility and sentiment-driven movements that often characterise listed markets. For a retirement portfolio, this translates to a potential for smoother overall returns and reduced drawdowns during periods of market stress, helping to preserve capital and enable compounding over the long term.

  
  

• Floating Rate Structures and Inflation Hedging: Many private credit loans are structured with floating interest rates, which adjust with market benchmarks (e.g., the RBA Cash Rate). This characteristic provides a natural hedge against inflation. As interest rates rise in response to inflationary pressures, the income generated from floating-rate private credit investments also increases, helping to maintain the real purchasing power of capital. This is a crucial consideration for retirees aiming to preserve their living standards over the decades.

  
  

• Strong Downside Protection: Private credit investments, particularly those in the senior secured segment that COI Capital Management prioritises, often benefit from robust collateralisation and strong covenants. These structural protections aim to provide principal preservation and mitigate downside risk in the event of borrower default. This emphasis on security and diligent credit analysis aligns directly with a long-term wealth-building philosophy that values capital preservation alongside growth.

COI Capital Management: Partnering for Long-Term Wealth

At COI Capital Management, our investment philosophy is firmly rooted in a long-term wealth-building horizon for our Australian clients. As an investment manager and non-bank lender specialising in commercial real estate debt and equity, we strategically navigate the evolving private credit landscape to identify opportunities that align with this objective.

Our disciplined origination and execution approach, with a strong emphasis on credit strategy and risk frameworks, is designed to identify and manage investments that can deliver attractive risk-adjusted returns over time. We believe that by leveraging our expertise in mid-market commercial real estate, we can unlock value for investors seeking:

• Consistent income streams: Essential for retirement living and portfolio re-investment.

  
  

• Capital appreciation potential: Driven by the underlying value of the real estate assets and the structured nature of our debt and equity investments.

  
  

• Enhanced portfolio diversification: Providing a resilient component to traditional asset allocations.

For Australian investors contemplating their retirement future, private credit represents a sophisticated and increasingly accessible asset class. Its technical characteristics, including attractive yields, low correlation, floating rate structures, and strong downside protection, make it a compelling complement to traditional public market exposures. COI Capital Management is committed to partnering with investors to harness the power of private credit, particularly within the dynamic Australian commercial real estate sector, to help build and preserve wealth for the long term. If you would like more information about private credit opportunities, contact our team at COI Capital Management.