Market overview
As the first half of 2025 unfolded, what has become very apparent to investors is that global markets have become adept at shrugging off much of the news that would have formerly been met with some trepidation and ‘risk-off’/’take profit’ periods. It appears that much of the posturing by US President Donald Trump surrounding tariffs and hard-line negotiating tactics have been dismissed as these plans have been continually postponed and/or watered down. Despite the news cycle continually focussed on President Trump and his extreme measures that are often disseminated through social media, the old story of the ‘boy who cried wolf’ comes to mind and what Wall Street commentators have now so eloquently fashioned as the TACO trade – Trump Always Chickens Out!
The geopolitical landscape in the world has never been so precariously positioned since WWII with the Russia-Ukraine war, the Israel-Gaza war, alongside the recent escalated Israel-Iran conflicts and China becoming keener to exert its military dominance. While the world finds itself in this heightened risk environment, the simple weight of funds and abundance of liquidity has led to most markets back to or close to record highs. Equity markets, bond markets, public market credit spreads, property markets and even bitcoin have all experienced rallies because of this ‘risk-on’ market over the last quarter.
These markets rallying have been aided by central banks now broadly assessing that inflation has been contained and have now entered interest rate easing mode. In Australia, the RBA has cut interest rates in two successive meetings to 3.85% from 4.35%, with the market largely pricing in another cut in August to 3.60%. This effect will also add further justification of markets grinding higher unless there is a large catalyst for investors to retreat to safety.
Delivering stability in uncertain times
At Revolution Asset Management (Revolution), the core ethos has always been to provide a strong focus on capital preservation with a non-correlated monthly income to provide investors with a strong defensive alternative solution that accesses loans originated solely from Australia and New Zealand.
While it is very difficult to predict what might lead to a correction in risk markets, it is comforting for our investors to understand that each loan that has been carefully selected in the portfolio has been rigorously modelled for downside macroeconomic and industry/sector risks.
Unlike many peers who are involved in property construction/development loans, Revolution is focussed on cashflow generating businesses in senior secured corporate loans or pools of high-quality loans within asset backed securities. Interest is serviced by either market leading, non-cyclical businesses or pools of loans that originated from largely prime borrowers and well-capitalised non-bank originators who have a strong ability to meet interest servicing costs under challenging market conditions. We prioritise receiving interest payments in cash from our borrowers, enabling us to deliver monthly distributions to our investors. This contrasts with some other managers who are willing to capitalise interest, which can reduce the reliability of income.
Revolution’s alignment of interest with investors is further demonstrated through several key measures such as third-party monthly valuations of all loans in the portfolio, frequent inflows into the fund, and the fact that no upfront fees are retained by Revolution on any loan. Additionally, there are no performance fees charged to investors in Revolution’s flagship strategy, underscoring our commitment to avoiding unnecessary risk beyond the fund’s stated target objectives.
In these heady times in markets which appear to lack concern in terms of risk, the relative haven of a well-constructed and stable portfolio of Australian and New Zealand private credit loans has been well received by investors.
Portfolio and pipeline review
The Revolution Private Debt Fund II (the Master Fund) has a total fund size of A$2.8 billion as at 30 June 2025.
The Master Fund has been performing well, meeting its target return of the RBA cash rate plus 4% to 5% p.a. (net of fees and expenses) since inception.** The objective of the Master Fund is to achieve this return with low volatility and with the benefit of having security over the underlying assets.
The Master Fund held a total of 54 loans as at 30 June 2025 with an average expected life of the portfolio being 1.1 years. The portfolio yield to maturity is 9.1%, with a credit spread of the portfolio above the BBSW benchmark rate of 536 basis points (bps). The average credit rating of the portfolio is BB+.
The deal pipeline in Australia and New Zealand remains robust, which should allow for continued strong deployment. In Leveraged Loans (LBO), activity increased in the quarter. The Asset Backed Securities (ABS) market also remains active. Revolution has been focused on upsizing many of its existing private warehouse investments as the size of facilities and the Master Fund’s appetite grows in tandem. Additionally, Revolution continues to find and capitalise on attractive secondary market opportunities across sectors.
Source: Revolution Asset Management. See below for defined terms.
Source: Revolution Asset Management. See below for defined terms.
Revolution Private Debt Fund II (CHN3796AU)*
Performance as at 30 June 2025.
| Return | 1 month | Rolling quarter | 1 year | 3 years p.a. | 5 years p.a. | Since inception p.a (31 Dec 2019) |
|---|---|---|---|---|---|---|
| Fund II (after fees) | 0.63% | 2.10% | 8.75% | 8.50% | 7.32% | 7.15% |
| RBA Cash Rate | 0.33% | 1.00% | 4.34% | 3.86% | 2.33% | 2.16% |
| Active Return (after fees) | 0.30% | 1.10% | 4.41% | 4.64% | 4.99% | 4.99% |
* Performance is for the Revolution Private Debt Fund II – APIR: CHN3796AU, and is based on month end unit prices before tax. Net performance (after fees) is calculated after management fees and operating costs. Individual Investor level taxes are not taken into account when calculating returns. This is historical performance data. It should be noted the value of an investment can rise and fall and past performance is not indicative of future performance. The comparison to the RBA Cash Rate is displayed as a reference to the target return for Fund II and is not intended to compare an investment in Fund II to a cash holding. Loans held by Fund II are subject to borrower default risk and as such Fund II is of higher risk than an investment in cash.
Portfolio characteristics as at 30 June 2025
| Fund characteristics | Fund II |
|---|---|
| Yield to Maturity | 9.1% |
| Credit Spread | 536 bps |
| Interest Rate Duration (years) | 0.1 |
| Weighted Ave. Credit Rating | BB+ |
Source: Revolution Asset Management. See below for defined terms. These ‘forward-looking statements’ are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed. Although we believe that the Fund’s anticipated future results, performance or achievements expressed or implied by those forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements.
Definition of terms
- Yield to Maturity (YTM) is the current total return anticipated on the portfolio if the portfolio is held until it matures.
- Credit Spread is the spread over the swap rate.
- Interest Rate Duration is a systematic risk or volatility measure for bonds. It measures the bond portfolio’s sensitivity to changes in interest rates.
- Weighted Average Credit Rating is a measure of credit risk. It refers to the weighted average of all the credit ratings in the portfolio.
For more information on performance and the portfolio of loans or about the Revolution Private Debt strategy, contact us.
This information is for wholesale and professional investors only and has been prepared by Revolution Asset Management Pty Ltd ACN 623 140 607 AFSL 507353 (‘Revolution’). Channel Investment Management Limited ACN 163 234 240 AFSL 439007 (‘CIML’) is the trustee and issuer of units for the Revolution Private Debt Fund II, Revolution Wholesale Private Debt Fund II (collectively ‘the Funds’). Channel Capital Pty Ltd ACN 162 591 568 AR No. 001274413 (‘Channel’) provides investment infrastructure and distribution services for Revolution and is the holding company of CIML. FundRock NZ Limited is the issuer of units in the Revolution Private Debt PIE Fund (NZD) (the ‘NZ Fund’). Public Trust is the independent trustee of the Scheme of the NZ Fund. Revolution is the appointed Investment Manager for the NZ Fund. Refer to fundrock.com/fundrock-new-zealand for more information. The NZ Fund is intended for the exclusive use of wholesale investors, as defined by the Financial Markets Conduct Act 2013. This information is supplied on the following conditions which are expressly accepted and agreed to by each interested party (‘Recipient’).
This information contains general financial product advice only and has been prepared without taking into account the objectives, financial situation or needs of any particular person. It is intended solely for wholesale clients (including sophisticated investors) as defined under sections 761G and 761GA of the Corporations Act 2001 (Cth). Revolution is not licensed in Australia to provide financial product advice or other financial services to retail investors.
The information provided should not be considered personal advice, a recommendation, or an offer to invest in the Funds. Recipients should not rely on this information in making investment decisions. A Recipient should, before making any investment decisions, consider the appropriateness of the information, and seek professional advice.
Neither Revolution, Channel, CIML, FundRock NZ Limited or their representatives and respective employees or officers (collectively, ‘the Beneficiaries’) make any representation or warranty, express or implied, as to accuracy, reliability or completeness of this information or subsequently provided to the Recipient or its advisers by any of the Beneficiaries, including, without limitation, any historical financial information, the estimates and projections and any other financial information derived there from, and nothing contained in this information is, or shall be relied upon, as a promise or representation, whether as to the past or the future. All investments contain risk. Past performance is not a reliable indicator of future performance.
For further information and before investing, please read the Information Memorandum available on request.