Wealthy families eyeing private funds, says former Cbus boss Justin Arter

Former Cbus chief executive Justin Arter says planned changes to superannuation tax laws could push more money from wealthy families into private credit funds.

Mosaic Private co-founder David Cowen with Geoff Harris, whose family office backs the private credit fund.

Former Cbus chief executive Justin Arter says planned changes to superannuation tax laws could push more money from wealthy families into private credit funds, including the one he has just joined as chair.

Mr Arter, who served as CEO of the $100bn industry fund from 2020 to 2023, now heads the board of Mosaic Private, a private credit fund backed by the family office of Flight Centre co-founder Geoff Harris.

Mosaic, which partners with major banks to provide secured lending for a portfolio of real estate assets around the country, has provided returns in excess of 10 per cent over the last three years. Private credit − also referred to as private debt and private lending − is an important alternative form of finance and generally focuses on small and medium-sized businesses that are not large enough to access the public debt and credit markets.

Former Cbus chief executive Justin Arter, who now heads the board of Mosaic Private.

Mr Arter, who has also held executive roles at Goldman Sachs and BlackRock, said private credit would look increasingly attractive to investors in a self-managed super fund.

Labor is proposing a 30 per cent tax on unrealised capital gains for superannuation balances exceeding $3m.

“Self-managed super funds set themselves up for growth a lot of the time, but taxing unrealised gains out of that is not much fun,” Mr Arter said. “I think at the margin, those proposed taxation rules help private credit and high-yielding investments.

“Certainly, the fund wasn’t set up with that in mind but that adjustment to the taxation legislation is not going to hurt.”

David Cowen, who co-founded Mosaic along with Geoff Harris’s son Brad, said the fund played to growing demand from family offices to protect intergenerational wealth transfers with low-risk investments.

“So what we’ve created is a private credit fund, which is built for the Harris family as investors,” Mr Cowen said.

“They’re looking at what their 50-year vision of intergenerational wealth transfer looks like and fixed income was a big pillar for them.”

He said the relationship with the banks, who usually took a first mortgage over a property while Mosaic took the second, was crucial to the fund’s success.

“It is such a unique proposition when we deploy our capital with the banks,” he said. “If they take a first mortgage and we take a second mortgage, then the borrower’s blended cost of capital is cheaper than going to other non-banks.”

Geoff Harris at a Flight Centre outlet in 1992.

He said Mosaic, which currently has funds under management of about $180m, was not trying to run a multibillion-dollar fund.

“We’ve got our own little niche and we will just stick to our knitting and do what we do well,” he said. “We will continue to deepen these bank relationships, pay our investors every month, protect their capital, do the right things, bring people like Justin on board, and keep deepening our experience across the team.

“I think the thing that’s really appealing to our investor base is the Harris family partnership and the fact that it is a fund that’s been built for an ultra-high net worth private family office. A lot of second generation capital is looking at what Brad Harris has built.”

He said Mosaic’s portfolio was focused on a range of commercial, childcare and industrial properties.

“We’re looking for quite defensive assets because what we’ve done exceptionally well is navigating quite a few economic cycles,” he said.

“We’ve been running this strategy for five years and we’ve gone through the Covid period of ultra-low rates and we’ve still performed well. We’ve also gone through a period of higher for longer interest rates and still performed well.”

Mr Arter said private credit was moving out of a “space of being something no one really talked about to being recognised as an appropriate slice of any investor’s portfolio”.

“I’ve been in and around investment markets for a long time as CEO and in charge of a large industry fund which I think gives you special insights into how a properly set up portfolio can work to generate good risk-adjusted long-term returns,” he said.

Originally published as Wealthy families eyeing private funds, says former Cbus boss Justin Arter