Looking for double-digit investment income? How the risk and return trade-off works

This interview was filmed Tuesday, 28th July 2026.

When Andrew McVeigh was CFO of Brookfield's Asia Pacific business, he kept noticing the same two gaps in the market. On one side were borrowers, particularly middle-market businesses and smaller developers, who were being under served by the banks. On the other, investors hunting for consistent income but finding that traditional fixed income and listed bond products weren't cutting it.

That observation became Remara, an Australian private credit firm McVeigh founded after nearly a decade at Brookfield.

In this interview, McVeigh explains how Australian private credit differs from the US market, where he sees risk building in the economy, and why he believes the structural gaps he identified nearly a decade ago are wider than ever.

Why Australia isn't the US

The stress coming out of the US private credit market has understandably made investors cautious, however McVeigh argues the two markets are structurally different enough that conflating them can lead to the wrong conclusions. Australian private credit is predominantly asset-backed, whereas the US market largely lends against cashflows.

"The tangible asset backing actually provides substantial coverage for investors," he says. "And I think that gives a very different security benefit to investors to what they traditionally see in the US."

The Australian non-bank market also has less exposure to the sponsor-backed and SaaS-style lending that dominates the US and has come under pressure when market conditions deteriorate.

Gated redemptions

Unlike listed shares, private credit funds operate on redemption cycles, either monthly, quarterly, or with lock-up periods.

One structural feature that can derail new entrants to the asset class are gated redemptions, which is the ability of a fund manager to slow or limit investor withdrawals during periods of stress.

McVeigh says this is a necessary protection in a less liquid market. "Gating of redemptions is key for investments that are not as liquid as public markets to ensure investor protections are maintained, to make sure that investors are not forced to have losses just because you need to liquidate assets or liquidate things that are illiquid in nature."

How the risk and return trade-off works

Remara's fund range illustrates how liquidity and return are directly linked and are traded off against one another across a private credit portfolio range.

At the lower-risk end, the Investment Grade Credit Fund targets around 7% p.a. net of fees with monthly liquidity, a core income option for investors who want access to their capital relatively quickly.

A step up from that on the risk ladder is the Credit Income Fund, the firm's largest by funds under management, which returned roughly 10% return p.a. over the last 12 months, investing across both investment grade and sub-investment grade credit, with quarterly liquidity. 

For wholesale investors willing to accept a 12-month lock-up period followed by quarterly redemptions, the Credit Opportunities Fund targets around 15%, approximately 10% above the RBA cash rate. McVeigh describes it as "almost an equity-like fund" in terms of its risk profile.

Then there is the Real Estate Fund, which spreads exposure across multiple development sites rather than concentrating in a single project, which has returned just over 16.5% net of fees since inception. You can view the performance history of all of the funds here.

Why Remara is tilting towards childcare

Childcare is one of the sectors where Remara is actively increasing exposure.

The sector receives around $21 billion in annual government funding, has seen roughly 24% growth in the 0-6 aged population over recent years, and opening of more than 300 new centres annually. 

About 90% of the roughly $4 billion in total sector funding currently comes from banks, which McVeigh sees as a gap Remara is able to step in to.

"We don't naturally compete with the banks. We work with the banks and provide assistance capital. And that's where people are looking, to expand their business."

His preferred plays within the sector are metro repositioning opportunities - acquiring and refurbishing existing centres in established suburbs with existing demand, dual-income household dynamics, and less construction risk.

The move into childcare also reflects a strategic shift away from property following recent changes to negative gearing and capital gains tax. 

"Gaining further exposure into industries that are heavily supported by the government is favourable to our overall portfolio performance," says McVeigh.

The credit event view

McVeigh made a call late last year that the Australian economy was getting closer to a credit event, not further away. His view has not changed.

""I can't see at this point a lot of things changing that would make me have an alternate view.

"I don't think it's an impending credit crash that happens in the next six months. [But] I do think we're slowly walking towards that."

The factors he points to are higher rates for a prolonged period, softening consumer and business demand, and the drag on property values from the recent tax changes. Together, he argues, these create conditions that gradually tighten credit conditions.

In McVeigh’s view, this becomes something of an opportunity for private fund managers. If banks pull back as credit conditions deteriorate, non-bank lenders with flexible capital can step in at better pricing.

Regulation as a signal, not a threat

ASIC's increased focus on private credit has caused concern about the industry, but McVeigh sees it as a natural stage of market maturation.

For retail investors in particular, clearer regulatory standards should make it easier to assess and compare products across an asset class that has grown quickly and lacks the transparency of listed markets, he says.

"The work that ASIC is doing to be able to improve the regulation is warranted. And I think it's part of just the normal market evolution."