Private Credit vs Traditional Savings Products

The Landscape for Income-Seeking Investors

For investors looking for regular, predictable income from their capital, the traditional option has been straightforward: lock your money away in a conventional fixed-rate product and accept whatever rate the market offers.

With many standard savings products currently sitting around 3% p.a. or lower, the after-inflation, after-tax return on those products can be close to zero — or even negative. That’s not a loss on paper, but it’s a loss in purchasing power.

Private credit offers an alternative path. Instead of lending your capital to a large institution at their rate, your capital is deployed into direct lending — secured by real assets — at rates that reflect the actual risk and value of the lending activity.

Key Differences Worth Understanding

Return Profile

Traditional savings products typically offer rates in the 3% p.a. range. Private credit funds focused on property-secured lending can offer meaningfully higher returns — reflecting the different risk profile and less liquid nature of the investment.

Security Structure

Conventional savings products rely on the financial strength of the institution holding your money. Property-secured private credit, by contrast, is backed by registered mortgages over specific NZ property — a tangible, identifiable asset underpinning each loan.

Liquidity

This is where the trade-off sits. Traditional savings products are generally more liquid — you can access your capital more easily. Private credit funds typically have lock-up periods and notice requirements for withdrawals. This reduced liquidity is part of what enables the higher return.

Tax Structure

Returns from conventional savings products are taxed at your full marginal rate. A PIE-structured private credit fund caps the tax rate at 28% through the Prescribed Investor Rate — which can make a material difference for investors on higher tax brackets.

What to Consider Before Deciding

• Higher returns come with different risks — private credit is not a like-for-like replacement for insured savings
• Liquidity needs matter — don’t commit capital you may need at short notice
• Diversification is sensible — consider private credit as part of a broader portfolio, not the whole portfolio
• Understand the security — registered mortgages provide real asset backing, but property values can fluctuate
• Check the fund manager’s track record, lending criteria, and risk management approach

Wholesale investors only. Past performance is not a reliable indicator of future performance. Returns are not guaranteed and capital is at risk. This comparison is general in nature and does not account for individual circumstances. Different products carry different risks and are not directly comparable. We recommend seeking independent financial advice.