Investing for long-term wealth? It pays to be boring

Special Report: Chasing long-term wealth? In uncertain markets, real estate private credit is proving that steady, uncorrelated returns – not market thrills – build lasting portfolios.

Words by: Tom Cranfield, Executive Director, Risk & Execution, Zagga

In finance, excitement drives headlines. Equity markets soar, crash, and recover, creating the stories that resonate. Yet, long-term wealth creation is rarely exciting. Consistent, steady, predictable returns, along with the magic of compounding, are what protect, preserve, and build capital.

When it comes to investing, it pays to be boring.

As investors increasingly recognise the value of a conservative approach in times of volatility, real estate private credit has come to the fore. Across market cycles, over time, it has proven to be a consistent performer. While equity markets rise and fall, real estate private credit has delivered steady, uncorrelated returns.

To some investors that may sound dull – but for many, that very consistency is what makes the asset class valuable.

In fact, the “flat yellow line” in the chart below may be the most exciting one: it shows resilience. The consistent performance of private-credit funds such as this one across equity and interest-rate cycles demonstrates the benefits of an uncorrelated hedge within a broader portfolio.

This kind of stability is far from dull. It’s exactly what many investors seek: income without sleepless nights.

A proven approach

At its core, private credit is about lending money to borrowers. In the case of real estate private credit, funded by credible investment managers, that money is lent to experienced developers and is secured by physical property assets.

At Zagga, we focus on the deepest and most liquid segments of the market, predominantly mid-market residential property developments along Australia’s Eastern Seaboard. In practice, this means loans ranging from $5 million to $100 million, with developments valued up to $200 million.

For example, our recently funded development project in Rose Bay, NSW, is an investment-grade transaction for the construction of four luxury boutique apartments. This is being delivered by a highly experienced borrower who proactively chose private credit over traditional financing due to the bespoke loan terms, flexibility and commerciality that a specialist manager brings to transactions.

Property is a predictable asset class with proven, long-term performance. Over the past three decades, Australian property has increased over 6% per annum on average, supported by 20 years of sustained growth. While short-term conditions can shift, property values have historically shown stability. This, coupled with the current trajectory of the real estate market, provides a stable foundation for our 18-24-month project horizon.

Despite this stability, Zagga maintains conservative lending standards – typically at or below 65% loan-to-value ratios (LVRs). This conservative LVR adds an extra layer of protection and acts as a shock absorber against market volatility.

The uncorrelated multiplier

Diversification has long been the cornerstone of portfolio construction. For decades, investors relied on the negative correlation between equities and bonds: when one faltered, the other typically provided ballast.

But in recent years, traditional diversification strategies have faltered. Bonds and equities, once reliable counterweights, have often moved in tandem.

By contrast, private credit’s performance hinges more on interest rate cycles. Returns move in line with the cash rate plus a margin, offering investors reliable protection against inflation.

For instance, Zagga’s flagship Feeder Fund targets a return of 500 basis points above the RBA cash rate, returning 9.68% to investors as at June 30, 2025.

This alignment to interest rates means investors are less exposed to global market swings and more attuned to the domestic credit cycle – an arguably more stable anchor.

For investors, this uncorrelated profile is invaluable: it provides stability when traditional hedges fail, adding genuine diversification at a time when portfolios need it most.

It can pay to be boring

Investors are waking up to the appeal of being boring. Once considered niche, private credit has now become a core part of a well-diversified portfolio.

Today, Australia’s private credit market is valued at more than $200 billion, with about $85bn allocated to commercial real estate-related loans – approximately 17% of the total commercial real estate lending market.*

As banks continue to hold back due to capital constraints, private credit managers are stepping in to bridge the funding gap. Investors are recognising the sector’s defensive, income-generating appeal, and demand continues to grow. Institutional investors, from superannuation funds to global asset managers, are ramping up allocations, while SMSF and high-net-worth individuals are following suit.

Real-estate private credit offers a simple promise: dependable, stable, risk-adjusted returns. It has demonstrated a proven ability to preserve capital, generate defensive income, and deliver consistency through cycles.

In a world where geopolitical shocks, equity volatility, and macro uncertainty dominate headlines, boring often beats volatility.

Private credit demonstrates this in practice. By focusing on fundamentals – credit quality, risk management, capital preservation – investors can build portfolios that deliver long-term wealth generation without the drama.

Sometimes, it truly pays to be boring.

* Alvarez & Marsal Research Report, 2024

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Stockhead does not provide, endorse or otherwise assume responsibility for any financial advice contained in this article.

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.