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The Australian
29-07-2025
- Business
- The Australian
The Growing Draw for SMSFs
Why more SMSFs are turning to private credit Zagga says private credit is less correlated to markets The company backs the borrower, not just the asset Special Report: With markets on edge and super rules shifting, SMSFs are turning to private credit for steady income, lower volatilty, and attractive risk-adjusted returns. In a world that seems to lurch from one crisis to the next – pandemic, rate shocks, geopolitical upheaval – it's no wonder investors are rethinking the old game plan. Gone are the days when capital growth was everything. Today, defensive is the new aggressive. As the dust settles on a turbulent financial year, and Division 296 looms large on the super tax horizon, Aussie investors are waking up to a sober truth: you don't have to shoot the lights out to build a smart portfolio. Sometimes it's about holding the torch steady. The focus has now shifted from big swings for capital growth to something a little more... sensible. Income, consistency, capital preservation. And that's why private credit, a once-niche corner of the market, is starting to get more airtime. One such local player is Zagga, a specialist real estate private lender focused on mid-market secured loans along the Australian Eastern Seaboard. Zagga's CEO and Co-Founder, Alan Greenstein, explained that investors simply do not like uncertainty. Especially when you're talking about their super. 'Investors are saying, 'Hey, let me put my money into something that's going to give me a reasonable, predictable yield, with a very low risk of losing my principal. 'That's the appeal of real estate private credit.' Why the smart money is drifting off market Private credit isn't listed. It doesn't trade. And most of the time, it doesn't flinch when markets panic. At its core, it's just lending. Investors provide capital, borrowers pay it back with interest, and the loan is usually secured against a real asset such as property. That simplicity, Greenstein said, is a big reason it's gaining popularity among SMSF investors looking for stable income. 'If I buy shares in a company and there's a data breach, the share price might tank, even if the business is fundamentally fine. 'That kind of volatility just doesn't exist in private credit.' Traditional bonds, especially listed hybrids, have also become more correlated with equities – which defeats the purpose of holding them as a hedge. In contrast, private credit sits outside that cycle. It provides a rare source of returns that isn't dragged around by market sentiment. In real estate private credit, loans are commonly structured with floating interest rates, meaning the margin above the benchmark remains consistent. This rate alignment offers a built-in hedge, unlike traditional bonds which usually lose value when rates rise. 'It also helps smooth returns over time when compared to the volatility experienced across other asset classes,' said Greenstein. Why SMSFs are taking a closer look Greenstein also believes private credit has evolved from being an 'alternative' in portfolios to a genuine peer to fixed income. And for SMSF investors, that appeal is multi-fold. Many SMSF investors aren't trying to outperform the market. They just want steady income without the daily market noise. Zagga's flagship Feeder Fund, for instance, delivered 9.68% year-to-date (net of fees with distributions reinvested) and has never posted an investor loss since inception. Greenstein believes this could potentially offer SMSFs a compelling alternative for generating yield income without excessive risk. 'Ride the jockey' But behind that yield, quality control is everything. Zagga said it reviewed around $4.5 billion worth of deals in 2025, but only wrote 17% of them. The due diligence goes deep – borrower history, project viability, market demand, feasibility, builder credentials – the lot. Most borrowers are 'bank grade', but they often choose Zagga instead, drawn by the platform's speed and deep market understanding, explained Greenstein. And crucially, around half of Zagga's current borrowers are repeat clients, some on their sixth or seventh transaction with the firm. Zagga backs the borrower first, because even the best deal can go sideways if the sponsor isn't up to scratch. 'We ride the jockey, not the horse. 'A good jockey will win on a bad horse, but a bad jockey won't necessarily win on a good horse.' Not just pick-and-pray Zagga's model lets investors either spread exposure through managed funds or handpick individual loans for a potentially higher headline yield. Loan terms typically range from three to 24 months. If you've got six months of capital, you can choose a six-month loan. Want to lock in for two years? That's available, too. Funds also come with varied liquidity options. The Wealth Fund offers 90-day access. The CRED Fund, a unitised product on platforms, provides 30-day liquidity. So where does this fit in the bigger portfolio conversation? Traditional portfolios were built on a neat correlation story: bonds hedge stocks. But the market has shattered that belief, with both falling in tandem. As investors reassess their strategies, many are now shifting to a 25/25/25/25 model – balancing equities, fixed income, alternatives, and private markets. In that context, Greenstein believes private credit ticks a lot of boxes: steady income, inflation defensiveness, and low market correlation. But as interest rates start to fall, as the market expected they would, he warns against anchoring to an arbitrary number. 'When you're looking at return, look at return relative to what it is you're benchmarking against,' he explained. 'If you just say, I want 14% and the cash rate is 3.85%, you are taking enormous, enormous risk.' So… private credit isn't flashy, but in a jittery world, that might be the point. It's for those who know that a steady 9% today is worth more than a theoretical 14% tomorrow – especially if it never lands. And for SMSF investors after reliable income without the noise, it might just be time to ride the jockey. This article was developed in collaboration with Zagga, a Stockhead advertiser at the time of publishing. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
Straits Times
12-05-2025
- Business
- Straits Times
Private credit firm Zagga sees growing interest from Singapore and Asean for Australia real estate
While Australia's property development is considered hot, growth is not uniform across the continent, Mr Alan Greenstein, chief executive officer of Zagga said. PHOTO: BLOOMBERG SINGAPORE - Singapore and Asean investors keen to jump into Australia's housing market have typically favoured brick-and-mortar investment properties – but private real estate credit funds are gaining traction as an alternative avenue. Mr Alan Greenstein, chief executive officer of Australia's non-bank lender Zagga, told The Straits Times that strong demand for Australian real estate private credit is seen from institutional investors, family offices and wealth managers across South-east Asia. Unlike investors in Japan or South Korea, those in Singapore and neighbouring countries are more familiar with Australia and have deep connections through education, family ties and business relationships, he said. 'We are expanding our footprint and making it easier to invest with us,' he said. About 15 per cent of Zagga's funds under management (FUM) is from Asean investors, with its two biggest investors in the region based in Singapore and Japan. He hopes to double the Asean FUM in two years. Zagga has appointed Ms Roushana Sjahsam as its senior board adviser for Asean – a newly created role – to double down on its expansion here and in the region. Ms Sjahsam was previously managing director at financial services firm Cantor Fitzgerald Capital Markets in Hong Kong. She also worked at Citibank and credit provider ADM Capital before. She said investors in South-east Asia have put their money mostly in the US and European private credit markets, but Australia is gaining attention, underpinned in part by the country's strong governance and legal systems as well as a housing crunch fuelled by population growth and immigration. Zagga has appointed Ms Roushana Sjahsam as its senior board adviser for Asean - a newly created role - to double down on its expansion here and in the region. PHOTO: ZAGGA Private real estate credit are loans provided by non-bank lenders, like Zagga, to property developers. For property developers, such loans offer an alternative funding source to traditional banks, and for investors, an opportunity to earn income through interest payments. Mr Greenstein reckoned the private real estate credit in Australia is worth about A$90 billion (S$75 billion), representing about 17 per cent of the total real estate credit market there, which means about 83 per cent of the market is still being funded by banks. Zagga recently launched a new Singapore Variable Capital Company (VCC) – the Zagga Real Estate Credit Fund (ZRECF) – and has obtained A$20 million in commitments. Unlike in a regular fund structure where each fund has to be registered into one account, asset managers are able to incorporate multiple funds into a single VCC. Mr Greenstein said the target is to 'at least match' its Australia fund size of A$200 million. Mr Alan Greenstein told The Straits Times that strong demand for Australian real estate private credit is seen from institutional investors, family offices and wealth managers across South-east Asia. PHOTO: ZAGGA ZRECF will invest directly in prime commercial real estate across Australia's east coast, where the markets are 'most liquid'. Investors can choose to invest in their preferred currency – Australian dollar, Singapore dollar, Hong Kong dollar or the greenback. In Singapore, Zagga is one of the Australian real estate private credit managers from whom Bigfundr, a Singaporean family-controlled fintech platform, sources loan investments to offer to the retail base here. The Monetary Authority of Singapore-licensed and regulated Bigfundr offers retail investors access to real estate debt investment opportunities starting from $1,000, opening up an investment avenue that was previously only available to institutional or high-net-worth individuals. Since giving out its first loan in 2017, Zagga has invested over A$2.5 billion across more than 300 transactions in Australia's commercial real estate sector, spanning residential, commercial and industrial properties. The private real estate credit market in Australia has grown in recent years, fuelled by tighter banking regulations which have constrained traditional bank lending and increased demand for flexible financing solutions, Mr Greenstein said. This has allowed Zagga to carve out a niche in financing development projects in Australian cities experiencing housing shortages. While Australia's property development is considered hot, growth is not uniform across the continent, Mr Greenstein said. Melbourne's high-rise apartment market, for instance, has faced some challenges because of an over-supply which grew on the back of inflows of foreign students and large Chinese investments. 'But there was a cooling off in the relationship between China and Australia. Coupled with Covid-19, many didn't come,' he said. He expects the situation in Melbourne to improve with the return of international students and improving China-Australia ties. Zagga has a robust risk management system in place, he said. The firm maintains a zero-loss record, achieved through a conservative lending strategy that typically provides loans at only 65 per cent of a property valuation. This approach provides a significant equity buffer of 35 per cent against potential market fluctuations. He said: 'Even if we had to sell an investment at a reduced price, our investors have a significant cushion. 'The underlying asset value must diminish by 35 per cent before an investor loses a single dollar – something you simply don't see in the equity markets.' Zagga's expansion in Singapore is timely, Mr Greenstein said, as investors look for safe havens in times of market turbulence and are seeking to diversify from the US and Europe. Real estate private credit in Australia is delivering 'decent returns' of around 8.5 per cent in Sing dollars versus the dismal savings rates offered by banks, he said. Join ST's WhatsApp Channel and get the latest news and must-reads.
