MELBOURNE: Colonial First State (CFS), one of Australia’s largest pension and wealth managers, plans to accelerate its push into private-credit investments to hedge against potential inflationary policies by Donald Trump.
The US election result has reinforced the A$156bil or about US$101bil fund’s plans to build out its private-credit portfolio, especially if the president-elect carries out his campaign agenda, says chief investment officer Jonathan Armitage.
CFS aims to boost its allocation to the asset class, reported at less than 1% in May, to around mid single-digits in the next few years. If most of Trump’s policies are enacted, “those are more likely to be inflationary than not”, Armitage said in an interview.
“And we need to be sort of thinking about that and adjusting our portfolio appropriately.”
Trump’s planned levies on US imports could hurt global trade, while tax cuts would further stretch the federal budget and migrant deportations could shrink the pool of cheap labour.
That could then mean slower economic growth, faster inflation and a more cautious US Federal Reserve, making the floating-rate nature of private-credit deals more appealing, said Armitage. — Bloomberg
