In financial markets, drama makes headlines. Share prices surge, tumble, and rebound — creating the stories that capture attention. But building wealth over the long term is rarely about drama. It’s about consistency. Predictable returns, combined with the compounding effect, are what safeguard and grow capital over time. In investing, dull can often be the smarter choice.

Against a backdrop of heightened volatility, many investors are gravitating towards more conservative strategies. One asset class gaining prominence is real estate private credit. Unlike equities, which are prone to sharp swings, private credit has proven resilient across market cycles, steadily delivering uncorrelated returns.

What some may call “boring,” we see as its greatest strength: consistency. And that makes real estate private credit a compelling consideration in any well-diversified portfolio.

Consistency over cycles

Equity market highs and lows dominate the news cycle — but they also bring sleepless nights for investors. By contrast, the measured performance of real estate private credit provides a stabilising counterweight. Well-managed private credit funds have demonstrated that this consistency can enhance portfolios through both equity rallies and downturns, as well as shifting interest rate environments.

Far from dull, this reliability is exactly what many investors are seeking: income that doesn’t come with unnecessary surprises.

Why real estate private credit works

At its simplest, private credit involves lending money. In the real estate segment, that capital — deployed by experienced managers — is provided to seasoned developers, secured by tangible property assets.

Zagga specialises in the mid-market, focusing on residential developments across Australia’s eastern seaboard. Typical loans range from $5 million to $100 million, with project values up to $200 million. A recent example is a Rose Bay, NSW project financing four luxury apartments. The borrower, an established developer, opted for private credit over bank financing to access tailored loan terms and flexibility that only specialist lenders can provide.

Australian property has proven to be a robust, long-term performer — averaging over 6% p.a. growth across the past 20 years, with two decades of sustained growth. While short-term market conditions fluctuate, property values have historically held firm. This resilience, combined with our standard 18–24 month lending horizon, provides a strong foundation for investors.

Even so, we take a cautious approach. Zagga’s conservative lending — typically at or below 65% loan-to-value ratios (LVRs) — creates an added layer of downside protection. This conservative buffer is central to our philosophy: preserving capital is just as important as generating returns.

Diversification redefined

For years, investors relied on the relationship between equities and bonds to balance risk. When one dipped, the other usually rose. But more recently, that negative correlation has broken down — with equities and bonds moving in the same direction.

Real estate private credit provides a different kind of diversification. Returns track interest rate cycles — generally tied to the cash rate plus a margin — and in doing so, offer a natural hedge against inflation. For instance, Zagga’s flagship Feeder Fund targets returns of 500 basis points above the RBA cash rate, achieving 9.68% p.a. as at end-June 2025.

This alignment with interest rates, rather than global equity markets, helps insulate investors from external shocks. It’s a distinct source of stability when portfolios need it most.

A growing market

Private credit is no longer a niche alternative — it’s fast becoming a mainstream allocation. Australia’s private credit market now exceeds AUD$200 billion, with roughly AUD$85 billion tied to commercial real estate loans — about 17% of the overall CRE lending market.

As banks retreat due to capital constraints, private credit managers are bridging the gap. Investor demand continues to accelerate, with super funds, global institutions, family offices, and high-net-worth individuals all expanding their exposure.

The attraction lies in a clear value proposition: dependable, risk-adjusted returns, capital protection, and consistency across cycles.

The case for steady investing

Global uncertainty, market volatility, and geopolitical shocks dominate today’s headlines. But for investors, the best strategy often comes from focusing on fundamentals: credit quality, governance, and disciplined risk management.

At Zagga, that’s our approach. By keeping capital preservation front and centre, we deliver outcomes that stand the test of time. In investing, it turns out that “boring” isn’t boring at all — it’s what builds wealth.

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 in 2017, they have repaid over $1 billion in principal and interest, across more than 200 successful exits.

Why zig when you can Zagga?

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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.