What to do in a world of record low yields?

Posted on 25th September 2019 by Trevor in Blog |Finance in Focus |Uncategorized

We live in a world of record-low yields. And—for investors—the trend is heading in the wrong direction.

The Australian cash rate is at a record-low of 1.00%, and is it is possible it will fall to 0.50% by 2020. Yields on Australian 10-year government bonds have fallen below 1.00%, which is also a record-low.

In the USA, the Fed cut rates to close to zero, tried to raise them gradually back to normality, but recently made their first cuts in 11 years, with at least one more cut tipped to follow.

The European Central Bank and the Bank of Japan have both had their benchmark interest rates below zero for several years.

More remarkably, Jyske Bank, the third-largest retail bank in Denmark, recently unveiled a home loan with a negative interest rate of -0.50%.

Fine for borrowers. For investors, not fine.

Unconventional times call for alternative investments

With traditional low-risk asset classes performing poorly, many investors are wondering what to do with their money.

Property markets have been going backwards or treading water over the past two years. Bond yields are at lows: 5000-year lows, perhaps. In a deposit account anywhere, you’d be lucky to get 2% in the USA or Australia; in much of Europe and Japan, you’d be lucky to get any return at all.

Clearly, we live in unconventional times. So it makes perfect sense that a growing number of investors are embracing alternative investments.

Peer-to-peer commercial lending is a win-win scenario, and is increasingly popular alternative investment.

According to the most recent data from Australia Securities and Investment commission, peer-to-peer activity jumped by a massive 178% between the 2016 and 2018 financial years. The FY19 data, when it’s released, is likely to show significant further growth.

Peer-to-peer has gown into the space the banks vacated after the Great Financial Crisis. Banks don’t want to lend, but businesses do want to borrow, so there is a market there for people who want to make money, and for people who need to sustain their business activities.

Investors like lending to these borrowers, because they get to charge significantly higher interest rates than they’d earn through government bonds or term deposits. But borrowers also benefit, because they get access to finance that banks refuse to provide.

Commercial lending offers the classic win-win scenario – hence the sector’s rapid growth.

We’ve delivered average net returns of 9.43% p.a. with the Ebisu Income Fund where investors can join from AUD$25,000.

Banner Asset Management Group has earned a strong reputation with wholesale and institutional investors since opening its doors in 2010, offering a platform for investors and borrowers to do business together.

Between 2010 and 30 June 2019, our lending operations have delivered a weighted average net return of 11.85% to investors. This result is extremely impressive compared to other returns earned from various sectors.

And these returns have been achieved with a high degree of safety. We use conservative lending ratios and we only lend with first mortgage security.

Of course, past performance is no guarantee of future performance, but you don’t achieve such strong results over close on a decade by accident. We have high standards, quality systems and an experienced leadership team. As well as strong and consistent results.

So if low yields on your cash or investments bother you, and you’d like to see higher returns without sacrificing security, why not consider putting your low-risk money into the Ebisu Income Fund.

info@bannerjapan.com 03 5724 5100

Leave a comment