Similarly, if it’s in a term deposit, your investments are likely to also be going backwards.

The reason is that record-low interest rates (RBA cash rate of 0.75 of a percentage point) are providing a considerably lower return than the rate of inflation of 1.7 per cent. This means you could be losing close to a cent of each dollar you have invested.

It’s not only inflation we need to worry about. In recent years, the cost of essential goods and services such as medical cover, childcare, and food and drink has been rising far faster than the official inflation figures, meaning many Australian households are feeling the pinch.

Invest like the banks

If you are seeking to boost your investment returns, you might want to consider how the big banks make money.

Banks lend money to a range of borrowers. In addition to providing mortgages to home buyers, they also lend companies, from the big ones listed on the Australian stock exchange to small and medium enterprises (SMEs).

The latter are charged more than you are paying on your home loan, as they carry more risk and it is harder for a bank to take a business than a property in the event of default. Nonetheless, such loans are well secured, with a similar default rate to home lending of just 0.3 of a percentage point, depending how you measure it.

Some former bankers have realised that they can do what the banks have done for decades and have begun lending to corporates. They combine the capital from investors, earn a good return and share the profit among the investors on a regular basis. And as they are small and efficient, they can afford to take a lower fee than the banks, which is a drawcard for investors.

At Metrics, we believe corporate loans can offer a sound alternative to cash because of the defensive nature of these investments.

In terms of their classification, corporate loans are considered a subset of fixed income because of their potential to generate regular, predictable yields.

Corporate loans are lower down the risk spectrum than growth assets such as equities and property because they come with a range of embedded protections. Loans are generally secured by the borrower’s assets and lenders are paid before equity holders in the unlikely event of business insolvency. In addition, returns are linked to inflation.

For slightly more risk than a cash investment, corporate loan investors can expect returns of between 4 and 10 per cent, well above the term deposit rate of 1 to 2 per cent and far higher than the current rate of inflation.

An alternative source of return

In addition to the potential for an attractive total return, corporate loans also offer regular, consistent income. This is a key benefit if you are an investor who relies on income to meet your day-to-day expenses.

If you are still working and accumulating assets, continuing to grow your investments in the current market can be tough. IMF data has shown global growth slowed considerably in 2019, driven by the US–China trade war, Brexit-related uncertainty and climate-related risk.

As a result, you may wish to consider income-producing assets such as corporate loans as an alternative to growth assets.

And with interest rates hitting returns from cash and rising risks in global sharemarkets, we believe corporate loans are well worth considering for your portfolio.

Andrew Lockhart is a managing partner at Metrics Credit Partners.

more on this topic

Investment insights

Investor sentiment on Australian commercial property market remains cautious

In the wake of recent Australian government budget announcements, Asian investors are exhibiting a cautious optimism towards the Australian commercial property market. Linda Rudd, CEO of Realside, ...Read more

Investment insights

The hidden concentration risk in Australian portfolios amid mega tech IPOs

Australian investors are facing a significant shift in their international equity exposure, driven by recent changes in major US equity indices. This shift, largely unplanned for by many investors, ...Read more

Investment insights

Private markets see a retail shift as firms adapt to new challenges

Private markets are undergoing a significant transformation as individual investors gain greater access, according to the latest research by State Street Corporation. The Boston-based financial ...Read more

Investment insights

Kevin Warsh signals a return to monetary orthodoxy as new Federal Reserve chair

Kevin Warsh, the newly appointed chair of the Federal Reserve, made a strong impression during his inaugural press conference, signalling a shift towards a more orthodox monetary policy approachRead more

Investment insights

GP-led transactions surge to record $108 billion, reshaping secondary market dynamics

In a remarkable development for the secondary market, GP-led continuation vehicles have emerged as the fastest-growing segment, with transaction volumes hitting an unprecedented $108 billion in 2025Read more

Investment insights

Jurisdictional risk opens door for savvy energy investors

The Australian energy sector is navigating a complex landscape marked by seasonal lows in global demand yet surprisingly high prices. As the sector braces for potential volatility, experts suggest ...Read more

Investment insights

Gold and AUD among Amundi's strategic picks as global risks persist

Amundi, Europe's largest asset manager, has released its latest investment outlook, highlighting a reasonable global growth forecast despite noticeable divergences between the United States and EuropeRead more

Investment insights

RBA's decision to maintain cash rate met with cautious optimism from financial experts

In a move that has drawn a mixed but largely positive response from financial experts, the Reserve Bank of Australia (RBA) announced today that it will hold the cash rate steady. The decision comes ...Read more