August was a blockbuster month for economic data in Australia. The key takeaway? Cautious optimism remains the most sensible stance. While it would be nice to drop the “cautious” and lean fully into optimism, risks still linger.
Last month the RBA delivered the widely expected 25bps cut, lowering the cash rate to 3.6%. The decision seeks to balance its core objectives – inflation and employment. With inflation easing back into the 2–3% target range and unemployment remaining steady at 4.3%, the RBA opted to ease policy and signalled that further cuts may follow if these trends continue.
The rate decision was followed by more data: wage price index figures, labour force participation and unemployment data. While we can assume the RBA board had access to this information ahead of its decision, the rest of us had to wait a few extra days to get a fuller picture. And that picture supports a cautiously optimistic outlook.
What It Means for Investors
Interest rate cuts are a double-edged sword. On one hand, they signal that inflation is under control –positive news for markets and the broader economy. On the other hand, they put pressure on income streams, particularly for those relying on that income from their lifetime savings.
At La Trobe Financial, we remain unapologetically conservative. Our goal is to deliver enhanced income you can depend on. To do that, portfolio quality is paramount. We won’t chase yield at the expense of capital volatility. Through that lens, the distribution rates for the La Trobe Australian Credit Fund and US Private Credit Fund have been updated. While these reflect the lower interest rate settings in each economy, both funds continue to provide attractive enhanced income solutions delivered for investor with low-volatility.
La Trobe Private Credit Fund (ASX: LF1)
Recently, we successfully launched the La Trobe Private Credit Fund (ASX: LF1), our first listed investment trust providing investors with a balanced exposure to our flagship Australian real estate and US corporate private credit strategies.
We are pleased to see LF1 trade well over its first full month of listing and the unit price transacted within a band of $2.00 to $2.04. The fund continues to be more than 99.9% invested into the two underlying strategies, the 12 Month Term Account and the La Trobe US Private Credit Fund – Class A Units, with a small amount of cash held for working capital purposes.
The first distribution for LF1 was announced at 1.22 cents per unit. This equates to an annualised distribution yield on NTA of 7.18% vs a target distribution yield of 7.10%* (RBA Official Cash Rate + 3.25%). Another high-quality investment solution designed to provide a consistent, resilient income stream to investors.
Alternatives are attracting investment flows
Halfway through the decade, the 2020s are shaping up to be the most volatile in a century. With inflation easing and interest rates falling across most OECD economies, the search for inflation-beating yield –delivered with low capital volatility – is well underway. This is especially relevant given the ageing demographic profile across these economies.
As a result, investment flows into alternative assets like private credit have continued to grow. La Trobe Financial’s three Credit Funds, with their strong track record of delivering dependable enhanced income, attracted $2.85 billion in new funds under management across the last financial year – a record for the company.
You’ve heard this from us before, but it bears repeating; we remain deeply committed to maintaining and improving the quality of our investment portfolios and performance – and doing so with complete transparency.
* The target cash distribution yield is calculated based on the RBA Official Cash Rate as at the last Business Day of each month. The target cash distribution yield is an objective target only and may not be achieved. Any shortfall in net income generated may result in a distribution payment made out of capital invested. Future returns are not guaranteed, and a loss of principal may occur. Investors should review the Risks summary set out in Section 8 of the PDS
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, La Trobe Private Credit Fund & La Trobe US Private Credit Fund, consider the appropriateness of the advice having regard to your objectives, financial situation or needs and obtain and consider the relevant Product Disclosure Statement for the fund.
La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence No. 222213 is the responsible entity of the La Trobe Australian Credit Fund ARSN 088 178 321, La Trobe Private Credit Fund ARSN 686 964 312 and the La Trobe US Private Credit Fund ARSN 677 174 382. It is important that you consider the relevant Product Disclosure Statement (PDS) before deciding whether to invest or continue to invest in the fund. The PDSs and Target Market Determinations are available on our website.
Any advice is general and does not consider your circumstances.
