Private credit

Private credit investing has seen exponential growth in recent years, fueled by structural shifts in financial markets and a growing demand for flexible, non-bank lending solutions. Private credit is no longer a niche – it’s a major force in the market.

The release of a landmark report by corporate and financial regulator the Australian Securities and Investments Commission (ASIC) into the nation’s rapidly expanding private markets – and shrinking public markets – has brought this dichotomy into the spotlight, as indeed it has around the world.

All strategies work – until they don’t. But while private credit may not be everything it’s cracked up to be, the risks need to be weighed with a sense of pragmatism.

With many economists expecting the Reserve Bank to start cutting interest rates in early 2025, returns on term deposits could feel the pinch. Private credit is an alternative, but those pursuing this investment option will need to do their homework.

The respected property and investment research agency has given out its second-highest rating to Alceon’s property-based Debt Income Fund, which serves to highlight just how well the private debt sector can perform if done right.

While private credit is becoming more and popular, it’s not always becoming more and more transparent. And investors will only feel comfortable – and realise that it’s fairly “vanilla” – when they get a good look under the hood.

2023 may have had its challenges, but the cream of the private credit crop still managed to write plenty of loans. As inflation cools, the outlook for non-bank lenders in the commercial real estate sector, especially, is encouraging.

Spurred by the speed and flexibility of private credit, developers are eschewing banks in favour of trusted non-bank lenders. The lending market’s evolution is good news for housing in Australia.

As the world of private capital expands, and advisers depend on it more as an alternative diversifier, one group has questioned whether advice clients know enough about it and if more education is required.

Market forces and changing winds in the banking sector have supercharged private credit, which is growing faster than any other arm in private capital. For advisers, that might mean reassessing which portfolio sleeve it slots into.