Some managers in our asset class boast about the size and return profile of individual loan assets as part of their collective whole. Indeed, smaller managers tend to focus their investments into a small number of large loans, and the performance of their portfolios is driven by the performance of the few. To that end, it makes sense to champion the performance of individual assets.
But portfolio diversification matters, and can make a real difference in investment outcomes.
At La Trobe Financial, our approach is to carefully construct portfolios comprising very granular holdings. That is, a larger number of smaller loans. Such exposures provide a repeatable income experience for our portfolio investors. In fact, the entire Credit Fund now holds exposures across some 11,800 individual loans, with an average amount of just $767,546. We’re not aware of another manager in the sector that comes close to that level of granularity over such a large number of underlying assets.
Our approach to constructing portfolios goes to the heart of who we are as a business – we’re here to serve you, our investor. And in our view, this is the best way of extracting ongoing value for investors with the lowest volatility.
Let’s dig a little deeper.
Ask any manager, and they’ll say their portfolios are comprised of high quality assets. But who can actually demonstrate this in a material way? We can. With a staff of over 250, our Real Estate Credit team is the largest in Australia’s non-bank sector. We perform hands-on, deep-dive analyses on each loan application. But more than that, we also monitor our borrower credit scores and make that information public.
The result is that our average borrower has a credit score equivalent to a borrower in a Big 4 Bank. So, when we say our borrowers are of a high quality, we mean it.