Steady, consistent, and predictable returns, supported by the power of compounding, are what protect, preserve, and build capital. In investing, stability delivers superior outcomes.
Amid ongoing volatility, investors are rediscovering the value of a conservative approach — and real estate private credit has emerged as a compelling option. Across cycles, it has demonstrated resilience, producing consistent returns uncorrelated with equity market fluctuations.
While some may view such steadiness as uninspiring, at Zagga we see it as a defining strength. The dependable performance of our funds across both market and interest rate cycles highlights the value of an uncorrelated asset class as a stabiliser within diversified portfolios.
Consistency, far from being dull, is precisely what discerning investors seek: dependable income without unnecessary risk.
A Proven, Disciplined Approach
At its foundation, private credit is about lending to borrowers. In real estate private credit, these loans are typically secured by tangible property assets.
Zagga focuses on Australia’s deepest and most liquid segments — mid-market residential developments along the Eastern Seaboard with transactions ranging from $5 million to $100 million, and project values of up to $200 million.
A recent example is a luxury residential development in Rose Bay, NSW, comprising four boutique apartments. The borrower, an experienced developer, selected private credit over traditional financing for its tailored terms, flexibility, and commerciality — qualities that specialist managers bring to each transaction.
Property as an asset class has demonstrated remarkable resilience. Over the past three decades, Australian property values have increased by more than 6% per annum on average, supported by two decades of sustained growth . This history of performance underpins the stability of Zagga’s typical 18- to 24-month lending horizon.
Zagga maintains conservative lending parameters — generally at or below 65% loan-to-value ratios (LVRs) — to safeguard investor capital. This disciplined approach acts as a buffer against market volatility and reinforces their central priority: capital preservation alongside consistent returns.
The Uncorrelated Advantage
Diversification remains fundamental to prudent portfolio construction. Historically, investors relied on the inverse relationship between equities and bonds — when one weakened, the other offered support. However, in recent years, traditional diversification benefits have diminished as equities and bonds have often moved in tandem.
Private credit behaves differently. Its performance aligns more closely with interest rate cycles, with returns typically comprising the cash rate plus a margin. This provides a natural hedge against inflation and a stable income stream less influenced by global market swings.
For investors, this uncorrelated profile offers genuine diversification — delivering stability when traditional hedges falter and enhancing portfolio resilience when it is needed most.
The Case for Consistency
Investors are increasingly recognising that stability is a strength. Once considered niche, private credit has become an essential component of a well-diversified portfolio.
Australia’s private credit market now exceeds AUD $200 billion, with approximately AUD $85 billion allocated to commercial real estate-related loans — around 17% of the total commercial real estate lending market[1].
As banks continue to hold back due to capital constraints, private credit managers are bridging the funding gap. The sector’s appeal lies in its defensive characteristics and steady income generation. Institutional investors — from superannuation funds to global asset managers — are increasing allocations, followed by growing participation from SMSFs and high-net-worth individuals.
Real estate private credit offers a clear value proposition: stable, dependable, risk-adjusted returns. For Zagga, that means disciplined credit management, consistent income, and the preservation of investor capital.
In an environment dominated by volatility, geopolitical uncertainty, and shifting macroeconomic conditions, prudence and discipline prevail. By focusing on credit quality, risk management, and capital preservation, investors can build portfolios positioned for enduring wealth creation.
Sometimes, the most effective strategy truly is the most consistent one.
About Zagga
Zagga is a leading Australian alternative real estate investment manager founded in 2016. Headquartered in Sydney, and with offices in Melbourne and Singapore, Zagga is committed to delivering attractive, risk-adjusted investor returns, and tailored private credit solutions, across the capital stack.
A leader in their chosen niche of mid-market loan sizes ranging from $5 million to $75 million, the firm serves a growing base of wholesale investors, including HNW individuals, family offices, and quasi-institutional funders from Australia, China, Hong Kong, Israel, Japan, Mauritius, Singapore, South Africa, Switzerland, the UK, and the USA.
Since inception, they have repaid over $1.5 billion in principal and interest, across more than 200 successful exits.
Why zig when you can Zagga?
Disclaimer: This article is general information only and does not constitute financial product advice. Advisers should consider their clients’ circumstances and obtain independent advice before making any investment decisions.
