Private Credit in Australia: The Asset Class Everyone's Talking About

Australia's private credit market has roughly doubled in a few short years, and everyone from big super funds to everyday investors is being offered a slice of it.

So what actually is private credit, why is it growing so quickly, and what do you need to know before considering it? This guide covers the basics in plain English, including the risks Australia's corporate regulator has been warning about.

This is general information only, not personal financial advice — see the disclaimer at the end before making any decisions.

What is private credit?

Private credit (also called private debt or non-bank lending) is money lent to businesses or projects by investors and specialist lenders, rather than by a traditional bank. The loans aren't traded on a public market like the ASX bond market — they're negotiated privately between the lender (often a fund manager pooling investor money) and the borrower.

In practice, an investor puts money into a private credit fund, and that fund lends it out to companies, property developers or other borrowers in exchange for interest payments. The investor's return comes from the interest the fund collects, minus fees.

Private credit sits alongside exchange-traded bonds as a form of fixed income, but it works quite differently — most private credit isn't traded on an exchange at all, which has important implications for liquidity (more on that below).

How big is Australia's private credit market?

Australia's private credit sector has grown from roughly $100 billion in assets under management in 2024 to an estimated $200 billion by 2025, according to ASIC's surveillance work on the sector. More than 50 new private credit funds have launched since 2023, managing tens of billions of dollars of Australian investor capital.

That growth has been driven by strong demand from both institutional investors (super funds, insurers) and, increasingly, retail investors — with some funds accepting investments as low as around $2,000.

How does private credit actually work?

Private credit funds generally lend into one (or a mix) of three broad categories:

• Corporate lending — loans to mid-sized and larger businesses, often for acquisitions, expansion or refinancing.

• Asset-backed lending — loans secured against specific assets like equipment, receivables or inventory.

• Real estate lending — loans to property developers and builders, often for construction or bridging finance.

Some funds also hold distressed debt or equity-like instruments within these categories. Fund managers typically charge management fees (and sometimes performance fees) for sourcing, underwriting and managing these loans on investors' behalf.

Why is private credit growing so fast?

The short answer: banks pulled back, and someone had to fill the gap.

Since the 2008 global financial crisis, Australian banking regulator APRA has progressively tightened the rules around how much banks can lend and to whom, particularly for property development and business lending seen as higher-risk. That's created a genuine funding gap for businesses and developers who don't fit neatly into a bank's risk appetite — and private credit funds have stepped in to lend to them, often at higher interest rates than a bank would charge, reflecting the higher risk.

For investors, the appeal has been the promise of enhanced yield at a time when many were looking for income beyond term deposits and traditional bonds.

What returns does private credit offer?

Private credit funds in Australia have generally targeted yields in the order of 8% to 12% per year, though actual returns vary widely by fund, loan type, and how conservatively (or aggressively) the manager lends.

A few important caveats: these targets aren't guaranteed, past performance is not a reliable indicator of future returns, and higher advertised yields typically reflect higher underlying risk — not a "free lunch" compared to other income-focused assets like fixed income and gold. Some funds have also had to write down or suspend redemptions when underlying loans soured, which is a reminder that the headline yield isn't the same as the return you'll actually receive.

The risks: what ASIC has been warning about

Private credit's rapid growth has drawn close attention from the Australian Securities and Investments Commission (ASIC). Its 2025 surveillance reports (REP 814 and REP 820) flagged several concerns, particularly in funds aimed at retail and non-institutional investors:

• Valuation and liquidity issues. Because loans aren't traded on an open market, valuing them involves judgement calls by the fund manager. ASIC found inconsistent valuation practices that can affect the price you pay to enter — and the price you get when you try to exit.

• Governance and conflicts of interest. ASIC noted weaker governance and poorly managed conflicts of interest in some retail-focused funds, compared to funds serving institutional and superannuation investors.

• Fee transparency. Fee structures in some funds were found to be opaque, making it hard for investors to compare products or fully understand what they're paying.

• Illiquidity. Many private credit funds are unlisted and offer limited or periodic redemption windows — meaning you may not be able to withdraw your money quickly if you need it.

• Underlying credit risk. At its core, private credit is still lending. If borrowers can't repay, the fund's investors can lose money, even where loans are secured against assets.

None of this means private credit is inherently a bad investment — but it underscores why due diligence matters more here than with, say, a broad market ETF. This is particularly relevant for SMSF trustees, who carry fiduciary obligations under their fund's investment strategy to weigh liquidity, diversification and risk carefully before adding an illiquid asset like this.

How can everyday investors access private credit?

There are a few different ways to get exposure, each with different liquidity and structure trade-offs:

Unlisted managed funds are the most common route, typically requiring you to apply directly to a fund manager, with redemptions processed periodically (monthly or quarterly) rather than on demand.

ASX-listed investment companies and trusts (LICs/LITs) give private credit exposure through a vehicle you can trade on the ASX like a share — for example, the La Trobe Private Credit Fund (ASX: LF1). These are typically closed-ended, meaning the traded price can sit above or below the fund's underlying net asset value.

ETFs offer another listed option — for instance, VanEck's Global Listed Private Credit ETF (ASX: LEND) invests in globally listed companies involved in private credit, rather than lending directly. Unlike closed-ended LICs/LITs, an ETF is open-ended, which is a structural difference worth understanding before you compare products.

If you already hold ETFs or shares, ASX-listed private credit vehicles can be bought and sold the same way — through your existing brokerage account, with the same $9.50 flat brokerage you'd pay on any other ASX trade with Selfwealth.

Private credit vs shares, bonds and term deposits

Private credit is often pitched as a "diversifier" — a way to add an asset with a different risk-and-return profile to a portfolio built mostly around shares and ETFs. Its returns have historically shown relatively low correlation with Australian equities, which is the theoretical appeal for portfolio diversification.

Compared with exchange-traded bonds or term deposits, private credit typically targets higher yield — but in exchange for less liquidity, less transparency, and direct exposure to the credit quality of individual borrowers rather than a government or a large, rated corporate issuer. It sits at a different point on the risk spectrum to other defensive, fixed-income assets, and shouldn't be treated as a simple substitute for either cash or listed bonds.

What to check before investing in a private credit fund

If you're considering a private credit fund, ASIC's own guidance and the issues it has flagged point to a few sensible checks:

1. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) in full, not just the marketing material.

2. Understand exactly how and how often the fund is valued, and what happens to your money if you need to redeem in a stressed market.

3. Check the manager's track record, how long they've managed private credit specifically, and how they handle conflicts of interest.

4. Get clarity on all fees — management fees, performance fees and any other costs — and how they compare across similar funds.

5. Consider whether a licensed financial adviser should review the product against your personal circumstances before you invest.

Is private credit right for you?

That's a personal question, and one this article can't answer for you — it depends on your goals, timeframe, existing portfolio and appetite for illiquidity and credit risk. What we can say generally is that private credit is not a term deposit substitute, isn't risk-free, and rewards investors who do their homework on the specific fund or vehicle in question.

If you're an existing self-directed investor, the more accessible starting point for most people is an ASX-listed vehicle (an ETF or LIC/LIT) that trades like a normal share, rather than an unlisted fund with lock-up periods.

Sign up to Selfwealth to trade ASX-listed shares and ETFs — including listed vehicles with private credit exposure — for a flat $9.50 brokerage per trade.

FAQs

What is private credit in simple terms? Private credit is money lent to businesses or projects by investors and specialist fund managers, rather than by a bank. Investors earn a return from the interest paid on these loans.

Is private credit the same as private equity? No. Private credit involves lending money (debt) in exchange for interest payments, while private equity involves buying an ownership stake (equity) in a company. Private credit investors are generally repaid before equity holders if a borrower runs into trouble.

How big is the private credit market in Australia? ASIC estimates Australia's private credit market at around $200 billion in assets under management as of 2025, up from roughly $100 billion the year before, though estimates vary depending on what's included in the definition.

Can retail investors access private credit? Yes, though access has expanded quickly, with some funds accepting investments from as little as around $2,000. ASIC has flagged that retail-focused funds have generally shown weaker governance and disclosure than those built for institutional investors, so extra care is warranted.

What are the main risks of private credit? Key risks include illiquidity (you may not be able to withdraw on demand), valuation uncertainty, underlying borrower default, and, in some funds, opaque fees and weaker governance — all issues ASIC has specifically flagged in its 2025 reviews.

How can I invest in private credit through the ASX? You can gain exposure through ASX-listed vehicles such as listed investment trusts (e.g. La Trobe Private Credit Fund, ASX: LF1) or ETFs (e.g. VanEck's Global Listed Private Credit ETF, ASX: LEND), which trade like ordinary shares through a standard brokerage account.