As the Australian private credit market nears $235 billion, the education gap becomes the real story

Australian private credit has grown faster than most investors’ ability to understand what they are actually buying. That gap, not the growth itself, is the problem worth advisers’ attention.

The market has expanded from a niche corner of institutional portfolios into one of the largest asset classes in the country.

By one industry estimate it now sits at approximately $235 billion in assets under management (AUM), having grown at a compound annual growth rate of 21 per cent over the past decade, and is on track to overtake the local bond market by 2029.

Estimates vary depending on scope and definition, but the direction of travel holds regardless of which yardstick is used.

Not all private credit is the same, and that distinction gets lost in the headline numbers.

The Australian private credit market is maturing faster than its investors

US corporate credit carries a fundamentally different risk profile to Australian real estate-backed lending. Gating and liquidity issues in some offshore funds are a reminder of what happens when that complexity is misunderstood.

Alan Greenstein, CEO and co-founder of private credit manager Zagga, puts the issue directly. “Not every investor has the experience or expertise to understand the complexities of private credit and the vast and varied opportunities within it. We have seen global investors caught unaware by this, with the current rhetoric around gating and liquidity highlighting the need for more investor education.”

The shift in who holds this exposure makes the point concrete. UBS data shows almost 80 per cent of family offices intend to maintain or grow their private credit allocations over the next five years.

High-net-worth investors and self-managed super funds now make up a growing share of that capital. Many do not have the resources institutions have to interrogate what they are buying.

The case for Australian real estate

Within the broader private credit market, Greenstein argues that Australian real estate lending stands apart on structural grounds. Commercial real estate lending now accounts for around 18 per cent of the market, with $92 billion invested.

“Conditions in US corporate credit have tightened, while the UK and Europe have seen capital struggling to be deployed,” Greenstein says. “Australian real estate private credit has largely differentiated itself due to its backing by quality, underlying real assets, a resilient, demand-driven economy, well-regulated lending market, and the strong tailwinds powering our local property sector.”

That is a reasonable case for the segment. It is also worth noting that this is a case a real estate-focused lender has an obvious interest in making. That is not a reason to dismiss it, but a reason to test it against the same due diligence any allocation should receive.

What the whitepaper argues

Zagga, which has operated in the market since 2017, has published a whitepaper, “Opportunity through uncertainty”, covering the changing investment landscape, risks and opportunities across global private credit markets, and the role of governance and risk management in assessing managers.

Greenstein frames the underlying problem as one of trust keeping pace with capital. “The ability to deliver across market cycles is now the baseline for trust. Experienced, specialist managers need to do more. We need to act as true partners, securing trust and transparency by ensuring investor education keeps pace with capital allocations.”

Market cycles are shorter and more intense than they were nine years ago, and macro headwinds have not gone away. Greenstein argues that managers who treat borrowers and investors as long-term partners, rather than transactions to be processed, are the ones likely to hold up through that volatility.

Advisers should be asking harder questions

For advisers recommending private credit to clients, the practical questions are specific. How is capital being deployed? Who is managing it? What happens to investors when a manager comes under stress? Those are not optional questions ahead of an allocation. They are the substance of it.

Private credit has earned a place in Australian portfolios on performance. Advisers are better placed to answer whether individual investors understand what they hold than headline AUM figures suggest.

Greenstein will expand on these themes at the upcoming Income & Defensive Symposium, taking place on 25 and 27 August 2026.