Successful credit investment isn’t about identifying the next big winner. It is about making thousands of disciplined decisions across sectors, locations and borrowers, and managing the risk that comes with each one.
Every month, La Trobe Financial settles between $1.2bn and $1.5bn of new loans in the Australian market. Behind that number sits a simple discipline: in credit investing, our job is not to get enthusiastic about one investment, one sector, or one opportunity. Our focus is to stay diversified, principled, and conservative. All the time.
The scale behind the portfolio
Here is some perspective.
Each month, La Trobe Financial settles between $1.2bn and $1.5bn of new loans in the Australian market. That is thousands of loans, to thousands of borrowers, secured by thousands of properties around Australia. They may be funded by our La Trobe Australian Credit Fund, our numerous banking warehouse facilities, or ultimately through our ongoing issuance of Residential Mortgage Backed Securities (RMBS) into the global market. This itself means even more decisions around the allocation of assets.
It should not be lost on the casual observer that every single one of these billions of dollars comprises loans requiring multiple assessments, across multiple teams, to ensure the highest standards of credit are maintained.
The guardrails behind every decision
Decision making of this quantum requires strict guardrails. To name just a small number.
At a business level:
- Credit decision making follows a strict, business-wide policy.
- Where assets are funded follow strict allocation policies.
At a portfolio level:
- Sector and geographic exposures are subject to minimum and maximum allocations.
- Liquidity management is managed daily with strict reporting and monitoring.
Having developed these fundamental disciplines, systems and controls, we have also developed scale. The volume of loan applications we receive gives us a ‘first look’ advantage and an opportunity to pick the loans that meet our standards. And our scale also allows meaningful comparison. For example, we know through third party analysis that our average borrower credit scores are at bank-adjacent levels, and meaningfully higher than our non-bank competitors.
Chart: Average borrower credit scores, La Trobe Financial compared with other non-bank lenders. Source: third party analysis, La Trobe Financial.
Our scale also supports the generation of incredibly diversified portfolios. And thousands of loans means that the experience of an individual loan, or individual borrower, or even an individual location, cannot cause disproportionate impact on our portfolios.
Consider the 12 Month Investment Account, our flagship Australian credit strategy. Over 11,000 individual loan assets. Diversified by sector and with strict guardrails around allocations by sector, and by location.
Why we do not chase winners
And for all the thousands of decisions, La Trobe Financial is not focused on picking ‘winners’. Because not all investments will be winners. So rather than make one ‘big bet’, we remain focused on being disciplined, diversified and conservative. That way, if an individual loan does stop performing, our portfolios are designed to endure, our investors continue to be paid, liquidity continues, and in short, the show goes on.
La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence No. 222213 Australian Credit Licence No. 222213 is the responsible entity of the La Trobe Australian Credit Fund ARSN 088 178 321.
Any Financial product advice is general only and has been prepared without considering your objectives, financial situation or needs. You should, before investing or continuing to invest in the La Trobe Australian Credit Fund, consider the appropriateness of the advice having regard to your objectives, financial situation or needs and consider the Product Disclosure Statement for the fund.
