Monark CEO Letter: Troubles in the town square

Dear Monark Investors,

 

Welcome to the second half of 2025.

 

Rather than adding to the chorus of commentary on today’s financial markets, we’ve chosen to pause. A decision that brings with it a welcome sense of relief. After all, such is the volatility and noise that Monday’s beautifully written text can easily fade to an irrelevant footnote by Wednesday.

 

In this Letter we will focus on what we see as two cornerstones underpinning the destiny of both a small business and a great nation: an alignment of effort and the degree of integrity applied to that effort.

 

Essentially a cohesive community trusting its members to conduct themselves in a way that benefits each member of that community.

 

We hope you enjoy the read…

 

It’s a cold day in Melbourne.

 

And sadly, the weather seems to be an appropriate metaphor for much of the public mood. There’s a general air of discontent. Of frustration. Of edginess.

 

We have seen the harmony and cohesiveness of Australia and much of the West fade as the 21st century moves into its mid-twenties.

 

Why is this?

 

We can think of four fundamental influences, each contributing in their own harmful way: cultural, economic, environmental, and information consumption.

 

Before we briefly unpack each, a disclaimer. We have looked to tread carefully, respecting the old dictum never to discuss politics or religion in a bar. Nor, for that matter, in a CEO Letter. But neither do we wish to censor our views. Good communication is frank communication.

 

Cultural

 

Since the turn of the century, cultural change has been influenced by progressive politics, the popularisation of ideas associated with ‘woke’ discourse, and academic frameworks such as Critical Race Theory. These approaches often examine society through the lens of power and inequality, with the intent of amplifying marginalised voices. While they have contributed to greater awareness and institutional reforms, we observe that they have also heightened divisions and produced a more polarised society.

 

People are classified as oppressors or victims. Not necessarily for anything they have done or experienced personally, but due to their membership of a particular group. What were considered objective truths are now challenged as it is believed each group holds a different perspective. An example is the reinterpretation and rewriting of history.

 

So, rather than share a broad common identity, “we are Australians,” progressive thinking – or identity politics – encourages any number of narrow identities, usually defined by inequality, victimhood, and power differential.

 

Economic

 

Capitalism has had its critics since birth. But since it proved to be the only economic philosophy that made a positive and substantial contribution to increasing global wealth, it became the generally preferred system. However, for the first time in many generations there is every chance that young Australians will enjoy a lower standard of living than their parents and grandparents.

 

Property ownership has become a serious schism in Australian society.

 

For most of this century, the price of residential real estate, the family home, has comfortably outpaced the rate of inflation. Aspirant home buyers – primarily young Australians – have watched an ever widening gap form between average remuneration and average home price.

 

This is not how it should be. Capitalism is supposed to be dynamic. Aligning demand and supply. Finding new and better ways to extract output from scarce resources. But what we have seen are house prices in Australia’s largest city, Sydney, increase from a multiple of three at the turn of the century to now stand at 13. This ratio is lower for other major cities, but still materially up.

 

Unlike cultural fractures, economic reality has divided property owners and renters and has created particular polarity between younger and older Australians.

 

If voting patterns leave a clue, many Australians now see capitalism as a system that doesn’t work for them and have moved to support bigger government with a stronger focus on welfare and redistribution.

 

Environmental

 

Climate change is not a new phenomenon. In fact, the River Thames in London used to freeze over during especially cold winters in the “Little Ice Age” (roughly 1300–1850). The sixties and seventies saw many scientists fretting over global cooling.

 

But since the turn of the century, global warming and climate change have become high profile political and societal issues.

 

Not dissimilar to capitalism and home ownership, Australia’s endowment – and use – of fossil fuels has split society. One group believes that the use of these fuels in the past has had substantially negative impacts on both the Australian ecology and the planet as a whole.

 

Others point to the importance of a stable, reliable, and affordable energy grid and the contribution this has made to many of the benefits and standard of living we enjoy today. That cheap energy has been vital for Australia’s successful journey.

 

One group wants a big bang change to renewable energy, the other a more considered transition. Polarity is exacerbated by regular doomsday forecasts.

 

Information consumption

 

How people view and understand the world has changed dramatically this century. In 2000 the internet was still in its infancy and social media not even a twinkle in Zuckerberg’s eye. Society consumed mainstream media to form its views. People may have held different views on a particular news item, but almost everyone read the same content.

 

That changed just a few years later. Most people receive their content through feeds curated to their preference. Social media now informs society’s views. Our desks may be next to each other, but we live in different worlds.

 

This impact is compounded by an apparent change in the priorities of those who report the news. Whilst just a few years ago journalism was mainly about informing, it now seems more about influencing.

 

How does this affect the investor in general and Monark in particular?

 

We have always considered it important to hold an informed view of the environment within which we operate. None of the work we do takes place in a vacuum. Preferences change. Pricing changes. Confidence changes.

 

How does a more fractured, less cohesive society affect wealth formation? Frankly, in a multitude of ways, but we’ll focus on the two we feel most relevant to who we are and how we work: partnership and trust.

 

Partnership

 

Like an untuned engine, a discordant society makes subpar progress. We wrote in a recent update to investors in our Prime Credit Fund that:

 

Australian productivity growth (or lack thereof) had been our economy’s Achilles Heel for decades. Average productivity growth in the nineties was 2.3% per annum, the first decade of the 21st century saw growth slow to 1.4% per annum, the next an even more pedestrian 1.1%. We are currently going backwards, with productivity where it was in 2016.

 

RBA Governor, Michelle Bullock, has recently raised productivity as a key national issue. The issue received further attention at last week’s Economic Reform Roundtable.

 

However, we fear the framing of the problem and the solutions being touted miss the point.

 

In an insightful article appearing in last week’s The Australian, former Treasury assistant secretary, David Pearl, suggested that ideology was at the core of our productivity slump.

 

If he is correct – and we believe he is – the solution to Australia’s subpar productivity is far more complex than amendments to legislation. It requires enlightened leadership to heal the discord and to get all – or at least most – Australians buying into a common future and pushing in the same direction.

 

But the micro need not follow the macro.

 

Our response to a fractured society is to build a Monark community.

 

In a world where people look for differences, we look for common ground, ways we can work together. This applies to both our investors and our borrowers.

 

When creating Monark, we instinctively felt that a smaller group of like-minded and engaged investors – who knew and felt comfortable with the people with whom they entrusted their capital – would be infinitely preferable to joining the corporate numbers’ race: more investors, more funds under management, more employees, more locations. Just because something is scalable doesn’t mean you have to scale.

 

Looking back on our 13 years, we feel more strongly than ever that Monark is a peoples’ business. We want to be more to you than a monthly statement and a source of increasing wealth.

 

Through experience, we’ve identified the principles that guide our actions and the behaviours that bring the partnership life. Specifically, over:

 

Alignment: Discrimination and a sense that some groups are more favoured than others is polarising. George Orwell’s, “four feet good, two feet bad”. That’s why we believe it is important to eat our own cooking. We personally invest – and not just a token amount – in each and every opportunity we offer you and our other investors. Always on the same basis, in the same units.

 

Transparency: Information asymmetry is polarising. We believe a healthy community is an informed community. It’s easy to be transparent with good news. But you’ll also hear from us when a transaction requires extra effort to bring to a successful conclusion.

 

Accessibility: Those in a community are readily accessible to each other. If you’d like to discuss your portfolio, hear our views on real estate funding, or simply just want to look us in the eye, please shout out. We schedule regular investor events to maintain close contact with you and others in our community. Please let us know if you’d like to attend one.

 

A healthy community understands that we are all in this together. And that there are obligations underpinning this social contract. To us, the philosophy of partnership which has produced – and continues to produce – an engaged, supportive, and committed community, is truly our X Factor.

 

Trust

 

The broader community we described earlier in this note is not a trusting community. Why would it be when there is often such polarity in values and views? So many splinter groups with their own particular priorities?

 

Priorities energise a particular course of action.

 

It’s fair to say that most businesses have competing priorities and each tend to have trade-offs. A common example is a shareholder priority focussed on growing earnings. The priority of a startup business may be developing their minimum viable product with cash burn not an issue. An impact business may prioritise the benefits provided to the market they wish to serve.

 

For stakeholders, knowing the priority is important. Because it may not be you.

 

At Monark we believe our partnership philosophy is the source of the trust we experience from both investors and borrowers alike. Rather than our priority being informed by a particular stakeholder, it is informed by all stakeholders: providing our investors with strong risk-adjusted returns, backing quality borrowers developing attractive projects, all underpinned by a motivated and appropriately remunerated team.

 

We believe that trust cannot be requested. But must be earned. And that our priorities and the behaviour this informs, are our best currency.

 

In conclusion

 

Like many fellow Australians, we appreciate that there are troubles in the Town Square. That we are living through a challenging environment. And like many, we pray that our society returns to focusing on what we have in common, not what sets us apart. That cultural overreach, anger on our streets, and the sense of frustration felt by many, are a phase that can be remedied, rather than a given that is here to stay.

 

That’s what we hope. But our actions are informed by the infinitely wise Serenity Prayer:

 

God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

 

We will continue to carefully grow our Monark community with those who enjoy working with us. We’ll continue to be very deliberate about which deals we enter into and manage these as though it was our own funds – which, indeed, a material amount is. And we’ll continue to behave in ways that both maintain and increase the trust you have in us.

 

We wish you all the best for the remainder of 2025.

 

Warm regards

 

Michael Kark and the Monark team

CEO and Co-Founder, Monark