Don’t Put All Your Eggs in One Basket

An investor education update from Millbrook Group

Diversification has long been a cornerstone of a successful investment strategy. By spreading capital across different asset classes or investments, investors can reduce overall risk, dampen portfolio volatility, and improve the consistency of returns. When one investment underperforms, others may outperform—helping to smooth the journey over time.

This same principle holds true in the world of property credit investing. While all investments carry risk, a diversified approach within this asset class can offer enhanced stability and resilience.

At Millbrook Group, we provide investors with flexible pathways to build diversified exposure to property credit, whether through pooled funds or direct loan investments.

Two Approaches to Investing in Property Credit

1. Pooled Fund Investment
   Investors can gain instant diversification by investing in a pooled fund, such as the Millbrook Credit Fund – Diversified or the Millbrook Income Fund – Enhanced. These funds are actively managed by our experienced investment team and offer exposure to a wide range of loans that vary by borrower type, security type, loan-to-value ratio (LVR), geography, and term.

The benefit? If one loan underperforms, the impact is cushioned by the broader portfolio. This structure allows investors to benefit from the risk mitigation that comes with diversification—without having to manage the complexity themselves.

2. Direct Loan Investment
   For investors who prefer more control, direct investment into individual loans—via the Millbrook Credit Fund – Select or the Millbrook Income Fund – Select—may be more suitable. This approach allows you to choose specific loan opportunities that align with your personal risk profile and investment preferences.

However, it’s important to note that a single loan investment provides little diversification. In a worst-case scenario where the loan defaults, you could be fully exposed to a potential capital loss.

A Practical Example

Let’s consider an investor with $250,000 to allocate. They have a few options:

• Option A: Invest the full $250,000 into a pooled fund.
  This delivers immediate diversification across a number of underlying loans, reducing concentration risk and protecting against individual loan underperformance.
• Option B: Invest the full $250,000 into a single direct loan.
  This gives full exposure to the performance of one loan only—offering no diversification and leaving the investor vulnerable to potential capital loss if the borrower defaults.
• Option C: Construct a diversified portfolio of direct loans.
  This hybrid approach enables investors to retain control while managing risk:
  • Invest $50,000 into five separate loan transactions, or
  • Invest $25,000 into ten different loan transactions.

By spreading investments across multiple loans, you effectively create your own mini pooled fund—gaining the benefits of diversification while maintaining direct oversight of each loan.

The Takeaway

Diversification within property credit is just as important as it is in traditional investment markets. Whether through a managed fund or a tailored direct loan portfolio, spreading your capital across different loans can significantly reduce exposure to individual risks.

At Millbrook Group, we’re here to support both types of investors—those seeking a hands-off, professionally managed solution, and those wanting to build their own bespoke portfolios with transparency and control.

If you’d like to discuss which approach suits your investment goals, feel free to get in touch with our team.