La Trobe Financial’s US Private Credit foray more than fashion statement

La Trobe Financial’s Chris Paton acknowledges that private credit is somewhat in vogue at the moment, but he points out that La Trobe Financial’s decision to bring a US Private Credit product to market has been around four years in the making.

In fact, La Trobe Financial has developed the product in response to demand from its clients and advisers as an extension of the firm’s well-acknowledged expertise in Australian real estate private credit.

Asked to explain the commercial rationale for the company’s foray into US private credit, Paton said the purpose was to provide La Trobe Financial’s clients and their advisers with suite of products which are unique or into asset classes which are traditionally hard for them to access.

“Our investor base comprises over 100,000 investors and their world of investing has been quite simple for a long period of time – it’s been cash, it’s been bonds, perhaps, and some equities.  So the world of investment is very different now.* Providing investors access to broader asset classes is a real opportunity given our private market expertise and our deep international networks.”

Paton emphasised that the strategy was born more out of demand than anything else.

“With the strength of our brand, and the performance profile we’ve been able to deliver on our foundational asset class of Australian real estate private credit, we have been asked by advisers and investors for a long period of time to bring them something new, and something unique for them in terms of investment solutions.  So that is where the strategy was born out of.”

Paton then points to the centrality of US investment powerhouse, Morgan Stanley, in the equation and La Trobe Financial’s assessment that Morgan Stanley is the right business to help it penetrate the US middle market.

“I know private credit is all in vogue at the moment but we started these discussions with Morgan Stanley about four years’ ago now as we were looking to build out our La Trobe Global Asset Management strategy.  What we saw in Morgan Stanley and their private credit platform, and in the US middle market, is something that was really attractive and a unique opportunity,” Paton said.

“The US middle market has really attractive fundamentals. It is, by itself, the third largest economy in the world, it speaks to over 200,000 plus companies, it is the backbone of the US economy, it accounts for a third of total jobs and 40% of US GDP so it’s a huge market and it’s a market that’s going to stand to benefit from generational investment tailwinds which are going to be coming through over the next 20 years – it is things like digitisation, decarbonisation, deglobalisation, and debanking.

“We like the market for these fundamentals, and we wanted to find a manager that could deliver the best of what the asset class has to offer, and who has a similar approach to the construction of investment portfolios.  In Morgan Stanley and the way they approached credit (they’re quite conservative in their approach, their north star is preservation) we have a partner about whom we could have high conviction,” Paton said.

And the new product offering is building.

“We’re at about $175 million in assets under management. We launched it originally to wholesale investors in December of last year, we did that deliberately to test the product – we wanted to do it through an IM to test it live in market to see the interest, to see the take-up and make any adjustments to the product in response to market feedback before we took it retail.”

“We launched it to retail investors on 19 June with the PDS deployed into market.  We saw just over $1 million in the first month and momentum is really building.  As we get ratings on the product, as we get it on investment platforms, that will allow us to distribute more meaningfully into the advice channel as well.”

The wholesale product is already on platforms – all the majors Netwealth, HUB 24, Macquarie Wrap, Mason Stevens, Centric, and has a range of others coming online soon.

* Total investors is calculated by adding all individual & joint investors (which includes some investors with a current zero balance in their account) to reasonable estimates of investors investing via platform, trusts or SMSFs.

La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence No. 222213 is the responsible entity of 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 PDS and Target Market Determination are available on our website.

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 Us Private 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.

Content Partnership sponsored by La Trobe Financial