In this edition Paul Nagy contends that the strongest private credit portfolios are built around genuinely different sources of repayment, collateral, and economic drivers.
“Recent challenges in parts of the property and construction lending market have highlighted that many private credit portfolios may be more exposed to the same underlying risks than investors realise. Given the prominence of property-related lending within Australian private credit, investors are increasingly questioning how diversified their portfolios really are.”
“Manager diversification does not always mean risk diversification. Different funds, investment structures, and managers can still be exposed to the same borrowers, industries, or economic drivers. What appears diversified on the surface can ultimately be concentrated at the portfolio level.”
“Epsilon’s aim since inception has been to build loan portfolios designed for all market conditions. We have consistently sought exposure to performing companies with resilient cash flows, in diverse end markets and industries where traditional lenders remain active participants. This was a deliberate portfolio construction decision, not a reaction to current market events, with the intention of providing investors access to lending opportunities that are less widely replicated in the market.”