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The insights shared in this article are largely drawn from the Investor Outlook Masterclass panel discussion held in Melbourne June 2026, featuring Wealth Partners Andrew Johnston and Mark Johnson, alongside Panos Miltiadou, Partner – Property. The discussion was moderated by Kien Trinh, Head of Research at Stock Doctor.
With interest rates remaining elevated and market volatility continuing, many investors are looking beyond shares and traditional property to diversify their portfolios.
Alternative investments, private credit and fixed income are increasingly part of that conversation, but as these asset classes have opened up to a broader range of investors, they've also attracted closer regulatory attention, particularly around how private credit funds are valued and governed.
At our Investor Outlook Masterclass, our panel of experts explored how these opportunities work, where they fit within a portfolio, and — just as importantly — what investors should be scrutinising before they commit capital.
Why alternatives are gaining momentum, and why scrutiny is too
Alternative investments encompass a broad range of assets outside traditional listed shares and bonds, including private credit, infrastructure, hedge funds, private equity and specialist income-generating strategies.
According to Andrew Johnston, Partner – Wealth, one of the key attractions of alternative investments is the diversification they can bring to a portfolio.
Unlike listed equities, which can experience day-to-day price movements driven by market sentiment, alternative investments are often more closely linked to the underlying performance of a business, asset or lending arrangement, Johnston explains.
As a result, they can help reduce overall portfolio volatility while providing a source of returns that are less correlated with share market movements.
That closer link to underlying performance is precisely why selection and governance matters so much. As these asset classes have become more accessible to sophisticated and wholesale investors; – regulators such as ASIC – have signalled they are watching the sector more closely, particularly around asset valuations, liquidity terms and disclosure. That's a healthy development for investors, and it reinforces why due diligence matters more than the asset class label itself.
Understanding private credit
One of the fastest-growing segments within alternatives has been private credit.
Private credit refers to lending that occurs outside the traditional banking sector. While property-backed lending often receives the most attention, the market extends much further and includes areas such as business lending, supply chain finance, equipment finance and asset-backed lending.
The sector's rapid growth has been driven partly by changes in banking regulation over the past decade. As banks have tightened lending standards and become more selective about where they deploy capital, specialist lenders have stepped in to fill the gap.
This has created opportunities for investors to access investments secured against underlying assets or business cashflows.
"There can be really good businesses sitting outside the bank's lending box that still need access to capital."
That said, private credit is not a homogenous asset class, and quality can vary significantly.
Regulators have recently flagged that as the sector has grown, practices across the market have been inconsistent — from how funds report and define measures like defaults, through to how transparently fees and valuations are disclosed.
For investors, the takeaway isn't necessarily to to avoid the asset class, but to ask sharper questions: how are assets valued, how often, and by whom? What are the redemption terms, and are they matched to how liquid the underlying loans actually are? Who is doing the credit assessment, and how rigorous is it?
Importantly, today's private credit market is significantly more sophisticated than it was 15 or 20 years ago, with greater transparency, stronger governance and more experienced investment managers overseeing portfolios.
Risk and return: looking beyond the headline yield
One of the common questions surrounding private credit is whether the attractive income yields adequately compensate investors for the risks involved.
Andrew explained that successful investing isn't simply about chasing the highest return. Instead, investors should focus on the relationship between risk and reward.
Certain niche strategies may provide strong risk-adjusted returns because they are secured against underlying assets and supported by long-term cash flows.
The attractiveness of private credit can also vary depending on the broader interest rate environment. When cash rates are low, private credit often offers a meaningful income premium. In the current environment, with signs of borrower stress emerging in parts of the market, investors need to look past the headline yield and assess whether the return still justifies the risk.
Private credit is more than property
While property-backed lending often receives the most attention, private credit encompasses a much broader opportunity set. Corporate private credit strategies provide funding to established businesses for growth, acquisitions and working capital requirements.
These investments are typically underpinned by business cash flows, assets and earnings rather than direct exposure to a single property asset. In many cases, lenders also benefit from security over business assets, together with financial covenants that require borrowers to maintain agreed leverage and debt-servicing metrics. This provides ongoing visibility of borrower performance and creates early warning mechanisms if trading conditions deteriorate.
For investors, this creates diversification within private credit itself, with returns driven by a broad range of Australian businesses operating across different industries and economic cycles. While every lending strategy carries risk, the underlying drivers of performance can vary significantly, highlighting the importance of understanding exactly where and how a manager is deploying capital.
Property investment: debt vs equity exposure
Property remains a popular asset class for Australian investors, but many are unaware of the different ways they can gain exposure.
While many Australians associate property investing with owning a residential investment property, alternative property investments can provide exposure to the sector without the responsibilities of direct ownership.
Panos Miltiadou, Partner – Property at Prime Financial Group, specialises in identifying and structuring these opportunities. Panos works with developers and investors to access private equity and debt investments that aim to enhance portfolio diversification and improve risk-adjusted returns.
Panos outlined three distinct approaches.
- Traditional property investment, where investors own or co-invest in income-producing real estate and earn returns through rental income and potential capital growth.
- Property private credit, where investors lend against property assets rather than owning them directly. Returns are generally generated through interest payments, with the investment secured against the underlying asset.
- Preferred equity, where investors provide capital alongside a developer and participate in the upside of a project in exchange for accepting a higher level of risk.
Understanding where a particular investment sits within the capital structure is critical when assessing both risk and return.
Federal budget changes and emerging property opportunities
The panel discussed how changing market conditions and proposed policy reforms may create new opportunities across the property sector.
As investors reassess traditional residential property, growing interest is being directed towards sectors such as commercial property, development funding and build-to-rent projects.
Australia's ongoing housing supply constraints, low vacancy rates and increasing demand for rental accommodation continue to support long-term investment themes in these areas.
Build-to-rent is a theme that could become even stronger as market dynamics evolve.
However, selectivity remains vital, particularly as construction costs and economic uncertainty continue to impact project feasibility.
Managing property risk: why due diligence matters more than ever
With construction costs, labour shortages and economic uncertainty remaining key challenges, effective risk management has become increasingly important.
Panos highlighted several areas that professional managers focus on when assessing opportunities including:
- Sponsor Quality: evaluating the developer's track record, financial position and delivery history.
- Independent Valuations: ensuring asset values are assessed conservatively and independently.
- Construction Risk: reviewing whether contracts are fixed price and understanding any provisions that could lead to cost increases
- Downside Protection: building sufficient buffers into investment structures to protect investors if conditions deteriorat
Independent valuations have never been more important than they are today
A disciplined investment process and conservative assumptions can play a significant role in protecting investor capital when market conditions become more challenging.
Where bonds fit into a portfolio
Despite the focus on alternatives, bonds continue to play an important role in portfolio construction.
According to Mark Johnson, fixed income investments should be viewed as part of a broader portfolio strategy rather than as a standalone asset class.
Government bonds, corporate bonds and floating-rate notes each serve different purposes depending on an investor's objectives, risk tolerance and outlook for interest rates.
One of the key misconceptions is that bonds behave like term deposits. While both generate income, bond prices can fluctuate as interest rates move.
Bonds can provide stability, but they're not guaranteed. Their capital value can still move.
In a diversified portfolio, bonds can help provide income, reduce volatility and offer a counterbalance to growth assets such as equities.
A diversified approach to investing
The discussion reinforced a key principle of successful investing: diversification remains one of the most effective tools for managing risk.
Alternative investments, private credit and bonds each serve different purposes within a portfolio. When used appropriately, they can complement traditional asset classes, provide additional sources of income and help improve overall portfolio resilience.
Like an equity portfolio, diversification is critical. Different assets serve different purposes within a portfolio.
As markets continue to evolve, and as regulators continue to sharpen their focus on transparency in private markets — investors who take a broader view of available asset classes, and ask the right questions of the managers they invest with, may be better positioned to navigate uncertainty, manage risk and pursue their long-term financial objectives.
The information in this article contains general advice and is provided by Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (www.primefinancial.com.au/fsg) for contact information and information about remuneration and associations with product issuers. This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article, and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.
