Private Credit has grown into a major part of Australia’s lending market. Building on our previous discussion about manager quality, this article explores what ASIC’s surveillance found and the risks investors should weigh.
In our previous article, we explored why not all private credit managers are created equal and why lending standards, governance and risk management can have a significant impact on investor outcomes. Understanding manager quality is important, but it also raises a broader question: why has private credit become such a prominent part of Australia’s investment landscape?
Over the past decade, private credit has evolved from a niche institutional strategy into an increasingly accessible asset class for Australian investors. As traditional banks have become more selective in certain areas of lending, specialist non-bank lenders have played a growing role in financing businesses, property owners and developers across the economy.
For investors, understanding the forces driving this growth is just as important as understanding the risks. In this article, we examine why private credit has expanded, the role it now plays within Australia’s lending market, and the key factors investors should consider when evaluating private-credit opportunities.
Why Has Private Credit Grown?
Several structural trends have contributed to the growth of private credit in Australia.
According to ASIC’s REP 820¹, Australia’s private-credit market is estimated to represent approximately $200 billion in assets under management, reflecting substantial expansion over recent years. ASIC noted that growth has been supported by increasing superannuation savings, investor demand for diversification, greater retail participation through investment funds, and moderation in bank lending to some higher-risk areas of the property market.
At the same time, many borrowers have sought funding sources outside the major banks. Non-bank lenders have increasingly filled that role, providing capital across a range of commercial lending activities including business lending, real-estate finance and other specialised credit opportunities.
The result has been the emergence of private credit as a significant component of Australia’s broader lending ecosystem.
Market Snapshot
Some of the statistics highlighted by ASIC illustrate just how large the sector has become:
- Australia’s private-credit market is estimated at approximately $200 billion in assets under management.1
- Domestic private-credit funds account for approximately 70% of private-credit loans outstanding in Australia.1
- ASIC’s sector review examined 28 private-credit funds across retail and wholesale markets.
- Those reviewed funds included 20 retail funds with approximately $26.6 billion in assets under management and eight wholesale funds with approximately $3 billion in assets under management.1
- Fund sizes ranged from approximately $11 million to $12 billion, demonstrating the diversity of participants operating in the sector.1
These figures demonstrate that private credit is no longer a niche segment of financial markets, although investors should not interpret market growth as an indicator of investment suitability or future performance.
Increasing Institutional Participation
One notable feature of the sector’s development has been the growing involvement of institutional investors.
ASIC’s review included large Australian credit managers, global private-credit firms, specialist domestic lenders and a wide range of wholesale investors, including self-managed superannuation funds, corporations and sophisticated investors.1
Institutional participation has contributed to the increasing scale of the market and brought a wider range of managers and investment structures. However, institutional ownership alone does not eliminate investment risk. Investors must still consider the quality of underlying loans, portfolio construction, governance frameworks and liquidity arrangements.1,2
As private credit continues to mature, governance and transparency have become increasingly important factors for both regulators and investors. ASIC’s review identified these areas as central to maintaining confidence in the long-term development of the sector.1
What Risks Should Investors Understand?
Like any investment, private credit involves both opportunities and risks.
- Credit: The most fundamental risk is borrower credit risk. Returns depend on borrowers meeting their obligations to repay interest and principal. If a borrower experiences financial difficulty or defaults on a loan, investors may experience lower returns or loss of capital. Security arrangements may assist recovery efforts but do not guarantee repayment.2,3
- Liquidity: Unlike listed securities, private-credit investments generally cannot be bought and sold immediately on a public exchange. As a result, access to capital may be limited, particularly during periods of market stress. Withdrawal arrangements vary across investment structures and may be subject to liquidity constraints. Investors should understand the withdrawal terms applicable to a particular investment before committing capital.3
- Concentration: Private-credit portfolios may be exposed to particular borrowers, industries, asset types or geographic regions. Where diversification is limited, an adverse event affecting one area of the portfolio may have a greater impact on investment outcomes than in a more diversified portfolio. ASIC identifies portfolio diversification as an important consideration when evaluating mortgage and credit-related investment schemes.1
- Valuation: Private loans are generally not traded on public markets, meaning valuations often rely on internal processes, external valuations and portfolio assessments. The quality and independence of valuation practices can therefore play an important role in accurately reflecting portfolio value and investor outcomes. ASIC has highlighted valuation governance as a key area of focus within the sector.1,3
- Governance: Not all private-credit managers operate with the same level of experience, systems or governance. ASIC’s surveillance identified significant differences between managers in areas such as disclosure practices, liquidity management, valuation processes and conflict-of-interest (COI, a situation where a manager’s own interests could work against investors’) controls. Investors should therefore assess not only the underlying loans but also the governance framework supporting the investment strategy.1
The risks described above are examples of key risks commonly associated with private-credit investments, but they are not an exhaustive list. The risks applicable to any investment will depend on its specific structure, strategy, assets and circumstances. Before investing, investors should carefully review the relevant disclosure documents and ensure they understand all material risks, potential returns and investment terms, and consider obtaining professional advice where appropriate.
What Does a Mature Private-Credit Market Require?
As the market expands, ASIC has emphasised the importance of strong governance, transparency, risk management and investor disclosure.
ASIC identified better practices including:
- clear and consistent reporting
- robust valuation practices
- active liquidity management
- effective conflict-of-interest controls
- disciplined credit assessment
- transparent disclosure of risks and fees
These characteristics help support investor confidence and contribute to the long-term development of the market.
Final Thoughts
Private credit’s growth reflects more than a temporary market trend. It has become an established source of funding within the Australian economy and an increasingly recognised asset class for investors seeking income and portfolio diversification.
However, growth alone should not be viewed as a reason to invest. As with any investment, private credit involves risks, including credit risk, liquidity risk, valuation risk and the potential loss of capital. The quality of the underlying loans, the manager’s governance framework, portfolio diversification and liquidity management practices can all influence investor outcomes.
For investors considering private credit, understanding how the asset class works is an important first step. Equally important is understanding how loans are assessed, structured and managed throughout their lifecycle.
In the next article, we’ll look behind the scenes of a non-bank lender transaction and explore how a loan progresses from application through to settlement, highlighting the due diligence, credit assessment and risk controls that help underpin the lending process.
Disclaimer: General information only. Not financial advice. This article provides general information about private credit as an asset class. It does not take into account your objectives, financial situation or needs. Private-credit investments are not bank deposits, capital is at risk, and investors may lose some or all of their money. Before making any investment decision, investors should consider obtaining professional advice and review the relevant disclosure documents.
Sources
3ASIC, Regulatory Guide 45: Mortgage Schemes: Improving Disclosure for Retail Investors (March 2026)
Frequently Asked Questions
What Is Private Credit?
Private credit refers to loans that are not traded on public markets, arranged and managed by non-bank lenders or specialist investment managers rather than a bank. Investors gain exposure to these loans indirectly, sometimes through a managed fund. Loans may be secured by property or other assets, depending on the strategy, though security does not guarantee repayment.
How Is Private Credit Different From a Bank Loan?
Non-bank lenders can apply different credit-assessment and pricing approaches than banks and may assess borrowers on a case-by-case basis. A borrower using a non-bank lender is not necessarily higher risk, and being declined by a bank does not mean a loan is unsuitable. Private credit investments carry risks that differ materially from a bank loan or a bank deposit, including reduced liquidity and credit risk.
Is My Capital Guaranteed?
No. Capital is not guaranteed in a private credit investment. Security arrangements, where they exist, may assist recovery if a borrower defaults, but they do not guarantee repayment.
How Big Is Australia’s Private Credit Market?
According to ASIC’s REP 820¹, Australia’s private credit market is estimated at approximately $200 billion in assets under management, with domestic private-credit funds accounting for around 70% of loans outstanding, as at November 2025.
Who Invests in Private Credit?
ASIC’s surveillance found participants ranging from large Australian credit managers and global private-credit firms to specialist domestic lenders and wholesale investors, including self-managed superannuation funds, corporations and sophisticated investors. Retail investors can also access the asset class through registered managed investment schemes, subject to each fund’s eligibility criteria.
What Should I Look At Before Investing in a Private Credit Fund?
Investors should review a fund’s specific disclosure documents and consider factors including credit quality, portfolio diversification, valuation practices, liquidity and withdrawal terms, and governance standards, rather than relying on marketing claims or target returns alone.
