This month, the RBA cut the cash rate for the first time this year, marking the beginning of an easing cycle that is expected to deliver at least two more rate reductions before year-end. Lower interest rates typically reduce returns from traditional income sources, forcing investors to look beyond deposits and property.
Over recent years, income-focused investors have enjoyed strong returns from relatively low-risk assets, such as Bank Deposits, Investment Property Income, Bank Hybrids, and Private Credit.
As global interest rates continue their downward trend, the investment landscape is evolving rapidly.
On one hand, lower rates tend to catalyse increased allocation of risk capital into venture markets and smaller-cap listed equities, spurring innovation and growth in these sectors. On the other, the retreat in yields presents a pronounced challenge for income-oriented investors seeking the consistent returns that have historically underpinned balanced portfolios.
Anadara recognises the need for robust, sophisticated solutions in this environment. Our suite of structured yield investments is specifically engineered to address the complexities of a low-rate climate—balancing enhanced return potential with disciplined risk management and clear structural transparency. By opening access to previously exclusive vehicles such as Fixed Coupon Notes, we empower investors to diversify their income streams.
To support informed decision-making, we provide a comparative analysis below of leading yield opportunities currently available to investors, including their relative risk profiles and indicative yield ranges:
Cash & Term Deposits (3-4%)
Bank deposits remain the safest option for preserving capital, but returns have fallen significantly. Current rates are in the 3–4% range, which may appeal to highly risk-averse investors, but for most, this is well below income needs—especially after years of higher returns.
Investment Property Income (4-5%
Residential and commercial property yields remain stable in the 4–5% range, depending on location and tenant quality. While property provides long-term capital growth potential, it is illiquid, requires ongoing management, and is heavily influenced by interest rate cycles and housing policy.
Bank Hybrids (6-7% + Franking credits)
Bank hybrids sit between debt and equity and offer 6–7% yields, with additional benefits from franking credits. They are liquid and trade on the ASX, but investors must remember they carry more risk than deposits, with exposure to market conditions and potential conversion to equity.
Private Credit (8-20%)
Private credit markets have grown rapidly, with yields ranging from 8% to over 20% depending on the borrower profile and structure. Investors can access double-digit returns, but liquidity is limited, and due diligence on counterparties is essential.
Equity Linked Notes (10-30%)
Traditionally, alternatives have filled this gap—but access is generally limited to institutional and ultra-high-net-worth investors. Through its ISDA arrangements, Anadara can source and create customised alternatives that target relatively safe, fixed yields well in excess of 10% per annum.
One of the most widely used Equity Linked Notes among institutional investors is the Fixed Coupon Note (FCN). Anadara has structured a range of 12-month FCNs, with some generating fixed income above 30% per annum.
Another option is the Worst Of Knock In (WOKI) note, typically suited to terms of 24 months or more, offering regular fixed income in the 10–15% range. Here is a summary of these two popular products:
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Fixed Coupon Notes: Shorter term investments (often 12 months) with potential yields above 30% per annum.
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Worst Of Knock Ins: Longer term investments (24+ months) offering regular income in the 10–15% range.
Of course, all equity-linked products carry the risk that your principal may be used to purchase one of the underlying stocks at maturity. However, when structured around stocks you’re comfortable holding long term, this risk can be mitigated.
As rates fall further, demand for alternatives is likely to rise. Investors who are willing to embrace structured solutions and private markets can still achieve double-digit returns, provided they carefully manage risk and liquidity. Leveraging ISDA access to global tier-one investment banks, Anadara can design customised versions of these products to meet investor needs.
If you’re seeking consistent income in today’s lower-rate environment, get in touch with us. We can walk you through the available options, expected yields, and the trade-offs to consider when structuring one of these solutions. Please use the link below to book a time to speak to us.
As with any financial product, understanding the structure and potential payoff scenarios is key to making an informed decision. We highly recommend that investors speak to their professional adviser before choosing to invest in any of our products.
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