Private credit

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.

It’s been lauded as anything from a ‘”short-term fad” to the next great diversifier, but while private credit polarises investors it continues to provide robust, stable returns. Are private credit managers good enough to maintain their rapid ascension in the private capital arena?

While private credit is experiencing growing pains in some major markets, its rise continues apace back home with Regal Partners making another significant acquisition in the sector.

Private credit has seen huge inflows in recent years, but contrary to the claims made by some of its advocates it’s not a defensive asset class or a substitute for investment grade corporate and sovereign bonds.

Senior secured loans recover strongly from economic downturns and plenty of corporates are well prepared for any ructions ahead. Still, active management matters when it comes to selecting new deals.

There’s still ample opportunity for loans generate higher than historical average returns, with Invesco expecting outperformance over the next 6-12 months. And with a recession potentially on the horizon they come with downside protection included.

The mid-market private manager’s co-founding partner, Mick Wright-Smith, expounds on the biggest red flag borrowers can wave, as well as the lending advice he’d like to give to his younger self.

The proliferation of private credit providers in recent years is a boon for investors, explains Andrew Ash from Mason Stevens. But the attraction of diversification and returns comes with several caveats that investors should consider.