One thing our investors quickly come to understand about Ark’s structures is that rate movements don’t flow through evenly in both directions.

When rates are rising, the pass-through to investors is fast. Our facilities are predominantly floating rate, so as the cash rate moves up, investors feel that almost immediately. It’s one of the features of private credit that makes it genuinely attractive in a rising rate environment — and the 2022–2023 hiking cycle, which saw the RBA lift the cash rate by 425 basis points, demonstrated this vividly. Investors in floating rate credit strategies were rewarded quickly and meaningfully.

When rates are falling, however, the picture is different. Our structures are designed with floors and other features that mean the downside pass-through is slower and more graduated. The 75 basis points of easing we’ve seen through 2025 hasn’t translated into an equivalent and immediate reduction in investor returns. That asymmetry is intentional — it’s part of how we think about protecting investor outcomes across the cycle.

The convergence of managed accounts and private credit isn’t accidental. Consider what advisers need when constructing portfolios for sophisticated clients: regular income, reasonable liquidity profiles, comprehensible risk, and genuine diversification. Private real estate credit—when properly structured—delivers on all four.

Unlike private equity with its long lockups and J-curve dynamics, development finance typically runs 12 to 36 months. Unlike corporate credit with its complex capital structures, real estate loans are secured by tangible assets that can be valued through established methodologies. And unlike the listed alternatives that dominated portfolios through the 2010s, private credit offers genuine diversification from public market correlation.

The managed account structure solves what has historically been the barrier: operational complexity. How do you give individual investors access to institutional-quality strategies without the concentration risk of fund minimums or the tax complications of multilayered structures? You aggregate capital efficiently, maintain tax transparency, and provide monthly reporting that meets contemporary standards.

Australia’s $250 billion managed account industry didn’t reach that scale by accident. It reflects a sophisticated investor base that understands illiquidity can be compensated for, a regulatory framework that provides clear pathways for wholesale and sophisticated investors, and platform technology that finally works.

Here’s something that might surprise people: for a typical Ark development project, rate movements — even reasonably significant ones — are often not particularly material to the overall cost and margin equation.

Development financing is one component of a project’s capital stack, but it sits alongside land, construction costs, professional fees, holding costs, and sales margins. When you model the sensitivity of a project’s IRR to, say, a 50 or 100 basis point move in borrowing costs, the number is real but it’s rarely the swing factor. Construction cost inflation, sales velocity, and planning delays tend to move the needle far more dramatically than rate shifts at the margin.

That’s not to say rates don’t matter at the project level — of course they do. But it’s a more nuanced picture than the headlines often suggest, and it’s one reason we don’t fixate solely on rate direction when we’re assessing a deal.

The place where rate movements have the most profound impact on our portfolio is land value — and this deserves careful attention.

Land value is, at its core, a function of the present value of the future cash flows that can be derived from that land. When rates rise, those future cash flows — the proceeds from selling completed dwellings or industrial units — get discounted at a higher rate. That compresses land values. When rates fall, the reverse occurs.

This is not a theoretical observation. During the 2022–2023 hiking phase, we saw land values in many markets come under real pressure, particularly in greenfield residential and medium-density segments. Buyer loan approvals typically began responding within one to three months of a rate move. Building approvals followed within three to six months. Construction activity — commencements — lagged by six to twelve months. At the peak of the cycle, new dwelling loan commitments fell somewhere in the range of 30–40% from peak to trough over roughly 12 months. Building approvals fell 20–30%, with multi-unit approvals particularly volatile.

Conversely, as easing has come through in 2025, new dwelling loan commitments have responded — up 13–15% year-on-year within six to nine months of the first cuts, with investor lending up more than 20% over the same period. The pattern is remarkably consistent: housing credit is highly rate-sensitive, with the first visible effects appearing within a quarter and the bulk of the impact playing out within a year.

For us as lenders, this dynamic directly affects the security value underpinning our loans. It’s one of the most important lenses through which we watch rate movements.

If land value sensitivity is where rates matter most, then the duration of a loan is the single greatest determinant of how much that sensitivity matters to us.

The longer a project runs, the more time there is for rates to move, for land values to shift, for market conditions to change. A 36-month loan carries fundamentally more interest rate risk — and more general market risk — than a 12-month loan. This isn’t a revelation, but it’s at the heart of why Ark has deliberately oriented our portfolio toward shorter-duration lending.

Our preference for residential land development and industrial land development isn’t accidental. These sectors lend themselves to shorter loan terms – typically in the 12 to 24 month range — because the development process is more discrete and predictable. You’re not carrying a project through years of construction and presales uncertainty. You’re funding the early stages of the supply chain, where the value creation happens quickly and the loan resets or exits within a defined window.

In an environment where rate direction is uncertain — and it almost always is — shorter duration is one of the most effective risk management tools available to us. It’s structural discipline, not just portfolio preference.

The impact of rate movements is binary in some ways — rates go up, borrowing costs rise, affordability tightens, sentiment shifts. But in most other ways, it’s genuinely nuanced.

We draw on a wide range of data points: RBA communications and forward guidance, inflation indicators, employment figures, household debt serviceability metrics, lending approval data, construction cost indices, land value indices across our key markets in Melbourne, Sydney, Brisbane and Adelaide, and the positioning of major banks in the development lending space. Each of these tells part of the story. None of them tells the whole story.

That’s why when someone asks me if we think about rates much, the answer isn’t just yes — it’s that rate awareness is embedded in everything we do. From how we structure a facility, to how we assess the security value on a deal, to how we think about the duration profile of the portfolio, to how we communicate with our investors about what’s coming.

We don’t always get the timing right. Nobody does. But we’re always thinking about it, always stress-testing our assumptions, and always trying to ensure that wherever we sit in the rate cycle, our investors are well positioned relative to the risk they’re taking.

That’s the job.

If you’re an investor, borrower or strategic partner who values forward-thinking leadership, now is the right time to connect.

Let’s talk about where you want to go and how we can help you get there.