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.
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.
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Some of the statistics highlighted by ASIC illustrate just how large the sector has become:
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.
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
Like any investment, private credit involves both opportunities and risks.
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.
As the market expands, ASIC has emphasised the importance of strong governance, transparency, risk management and investor disclosure.
ASIC identified better practices including:
These characteristics help support investor confidence and contribute to the long-term development of the market.
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.
The Premium Income Fund offers Retail and Wholesale Investors the opportunity to invest in a pool of commercial loans, secured by mortgages over real Australian property.
The Premium Income Fund offers Retail and Wholesale Investors the opportunity to invest in a pool of commercial loans, secured by mortgages over real Australian property.
Disclaimer: This article is prepared by William Nguyen. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.
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)
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