At its simplest description, credit is about lending and lending can be a reliable way to earn a return.

Considered a defensive asset with growth characteristics, credit typically carries a moderate level of risk, sitting above traditional fixed interest but below the volatility of shares¹. This means that investments can help deliver stable income over time, but like all investments, they can still be affected by market conditions.

Through specialist investment managers, we invest in credit by lending money to companies on behalf of members. In return, those companies pay interest and that becomes a source of income earned by your investment option.

Credit also offers a layer of protection that most other assets classes don’t. For example, when a company borrows money, lenders are generally repaid before shareholders. However, no investment is completely risk-free and a company that can’t repay its debts can have a negative impact on returns. That’s why stress testing, liquidity risk management, and valuation oversight help provide us with confidence that investments remain consistent with our objectives. The credit asset class is, in most circumstances, a useful way to balance growth assets while helping to deliver on our smooth ride philosophy.

How CareSuper invests in credit

All of our Pre-mixed options invest in credit as part of a diversified investment mix. The credit asset class consists of two types of credit, each playing a different role in supporting long-term member outcomes.

Liquid credit

Liquid credit investments are typically loans and bonds that can be bought and sold daily, providing flexibility. This means investments can be adjusted quickly if market conditions change, helping us actively manage portfolio risk and liquidity.

Liquid credit plays a key role in keeping our portfolios resilient and ready to meet members' needs, including paying benefits when required.

Private credit

Private credit involves lending directly to companies through negotiated arrangements, outside of public markets. These investments aren't traded daily and typically offer higher interest rates in return for committing funds over a longer timeframe.

By combining liquid and private credit, we aim to deliver regular returns to members while reducing sharp ups-and-downs, consistent with our smooth ride philosophy.

Why credit investments benefit portfolios

Credit may not attract the same attention as shares, property or fixed interest, but it plays a vital supporting role in our investment strategy.

One of the advantages of credit is that loans in this asset class may come with a floating interest rate, which means the interest earned moves in line with broader interest rate conditions. To put it simply, when interest rates rise, the income generated from these investments may rise too. This is a useful characteristic, particularly in environments where interest rates are climbing, helping to support the delivery of returns to members.

Our credit investments are well diversified and structured within clearly defined risk settings for each investment option. This helps us pursue strong, long-term retirement outcomes for members, while avoiding unnecessary bumps along the way.

Disclaimers

¹ https://www.pimco.com/au/en/insights/navigating-public-and-private-credit-markets-liquidity-risk-and-return-potential

This is general information only and doesn't take into account your objectives, financial situation or needs. Before making a decision about CareSuper, you should consider if this information is right for you.

Past performance isn't a reliable indicator of future performance. The value of investments can rise or fall, and investment returns can be positive or negative.