Investment Spotlight

Property Spotlight: ASA Diversified Property Fund

The ASA Diversified Property Fund (ASADPF) is a long‑running Australian commercial property fund (since Aug 2006) focused on convenience retail and some business‑park assets across NSW, VIC and WA. The portfolio is high quality, highly occupied and income‑oriented with low near‑term capex requirements.

Occupancy at 99.5% and average lease length is 8.9 years.

Around 90% of the fund is invested in non-discretionary retail assets (leased to Coles, Woolworths, ALDI, Ampol) – providing essential services to everyday customers and protecting the fund from any potential future economic slowdown.

The fund also benefits from over 80% of its leases including annual rental increase clauses, lined to either CPI or fixed % increases, which provides additional protection against inflation over time.

Gearing in the fund has reduced to 41.1% with 90.3% of fund debt hedged versus interest rate movements, with a range of expiries through to 2029. This conservative gearing rate reduces risk associated with future interest rate rises.

Leasing results have been strong with new leases signed at their retail properties in Blackburn and Dog Swamp seeing rents rise 7.3% and 7.8% respectively, and at the Williamstown aerospace center lease increases at 6.5%.

The fund has recently sold its Busselton Central property in WA and has also secured terms to purchase a four-year-old, 15,000 square meter office building at 54 Wellington St Collingwood. This new property is leased to Bank Australian, The Commons, and others at an 8% cap rate, with occupancy at 88% and the Weighted average Lease Expiry at 4.6 years. This property was developed at a cost of approximately $160m, and the fund was able to purchase the asset for $108m. Expectations are for reliable lease income and property price growth.

The fund continues to pay a 7.05% cash distribution yield, which is expected to be fully tax-deferred for the 2026 financial year. Total returns are expected to be around 10% per annum over the next five years.

Strategy Spotlight: Debt Recycling: Turning Your Mortgage Into a Wealth-Building Tool

For many Australians building wealth alongside a mortgage, the family home loan sits quietly in the background while surplus income is used to pay it down. Debt recycling puts that same debt to work. As regular mortgage repayments reduce the loan principal, the equity created is redrawn and invested — typically into a portfolio of direct shares or listed securities — rather than left idle. Because the borrowed funds now serve an investment purpose, the interest becomes tax deductible. Repeated in tranches over time, this steadily replaces non-deductible home loan debt with deductible investment debt, without increasing the client's total debt level, building a growing portfolio alongside it.

Worked Example: A Client on the Top Marginal Tax Rate

The benefit is most pronounced for clients on higher incomes, where a deduction is worth the most. Consider a client on the top marginal rate of 47% (inclusive of the Medicare Levy) who redirects $100,000 of home loan redraw into a diversified share portfolio, funded at 6% per annum. The table below compares the after-tax cost of holding that $100,000 as ordinary mortgage debt versus a recycled investment loan.

	Non-deductible mortgage	Recycled investment loan
Amount recycled	$100,000	$100,000
Interest rate (p.a.)	6.00%	6.00%
Annual interest cost	$6,000	$6,000
Tax deductibility	Nil	Fully deductible
Tax saved at 47%*	$0	$2,820
Net after-tax cost	$6,000	$3,180

*Illustrative only, assuming interest-only funding and no offsetting investment income; franking credits and dividends would
further improve cash flow, and the deduction must be apportioned if funds are not used wholly for investment.

The after-tax cost of the $100,000 falls from $6,000 to $3,180 a year, simply by changing what the debt is used for — a saving that compounds meaningfully when reinvested over a ten or twenty-year horizon.

Why the 2026 Federal Budget Makes This More Compelling

The Budget's negative gearing changes add a timely dimension. From 1 July 2027, negative gearing will no longer apply to established residential investment properties bought after 7:30pm on 12 May 2026 — rental losses on these can only offset rental or residential property income, not salary or wages. New builds and gearing into shares are unaffected. For accumulators who may have looked to an investment property as their primary geared strategy, this narrows the field. Debt recycling into a share portfolio keeps full interest deductibility and offers greater liquidity, diversification and control than an established property, making it comparatively more attractive for clients deploying their next dollar of borrowing capacity.

Key Considerations and the Takeaway

Gearing amplifies both gains and losses, so the strategy suits clients with a comfortable risk tolerance, stable income, and a long-term investment horizon rather than short-term speculation. Interest rate movements and market volatility need to be factored in, and the deduction depends on maintaining a clear investment purpose for the borrowed funds. For clients still accumulating wealth alongside a mortgage, and with negative gearing on established property now curtailed, debt recycling into a portfolio deserves a fresh look. As always, we'd encourage any client considering this strategy to speak with their adviser first.

Equity Spotlight: GAM LSA Private Shares AU Fund

The Opportunity

GAM LSA Private Shares AU Fund provides Australian wholesale investors access to a diversified portfolio of late-stage, pre-IPO private companies, managed by Liberty Street Advisors. The thesis rests on a structural shift in capital markets: US-listed domestic companies have fallen from roughly 8,000 in the late 1990s to around 4,000 today, while median company age and market cap at IPO have both risen sharply (4 to 12 years; ~$493m to ~$1,812m). Companies now generating over $100m in revenue are 77% private, and unicorn counts (i.e. a privately held company that has reached a valuation of $1 billion or more) have grown from single digits in 2010 to over 1,300 by 2025 — more $1bn+ private firms now exist than constituents in the Russell 2000. The fund targets companies with $50m+ revenue, 30%+ growth, strong governance, and a credible path to exit, focused on late-stage VC/growth equity.

Performance

Since its March 2022 inception, the I AUD share class has returned 216.64% cumulative (32.35% annualised) versus 43.18% for the MSCI USA Small Cap benchmark, with a 1-year return of 25.45% and 3-year annualised return of 20.77%. Fund size stood at ~AUD 276m as of April 2026 (rising to ~AUD 299m by May), with a 1.9% management fee, no performance fee, and quarterly redemptions (capped at 5% of the Master Fund).

Sector & Portfolio

Holdings are concentrated in Aerospace (~21%), Finance/Payments (~17%), AI (~12%), and Analytics/Big Data (~11%), with top positions including SpaceX (~15%), Nanotronics Imaging, Dataminr, and Kraken. Roughly 80% of fund value sits in names with active near-term liquidity catalysts (IPOs, tender offers, S-1 filings), including Cerebras' Nasdaq listing and SpaceX's since-completed IPO — underscoring the fund's exposure to an active private-to-public liquidity cycle.

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Investment Spotlight

Property Spotlight: ASA Diversified Property Fund

Strategy Spotlight: Debt Recycling: Turning Your Mortgage Into a Wealth-Building Tool

Equity Spotlight: GAM LSA Private Shares AU Fund

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