With banks stepping back, InvestmentMarkets and Remara outline how private credit is reshaping opportunities for Australian investors
Australia is experiencing a structural shift in how credit is provided, with non-bank lenders playing an increasingly significant role as banks scale back certain types of lending. For investors, that shift is turning private credit from a niche allocation into a mainstream income strategy.
InvestmentMarkets CEO Darren Connolly said this change is creating both opportunities and challenges for investors. “In the US, around 70% of credit is provided by non-banks. In Australia, the share is smaller but growing quickly,” Connolly said. “Private Credit has been the most popular asset class on our platform year-to-date. The growth is providing investors with greater choice but also a greater need to interrogate the risks and rewards of each opportunity.”
Speaking as part of InvestmentMarkets’ recent ‘Insights Series’, Andrew McVeigh, Managing Partner at Remara said that while the sector has faced challenges in the past year, particularly in real estate lending, the broader market fundamentals remain strong.
“Real estate loans have attracted headlines, often because they involve larger obligors and slower work-outs when things go wrong. But when you look at the broader credit environment, Australians are holding up remarkably well,” McVeigh said. “Consumers are meeting their obligations, defaults are low, and well-structured credit continues to deliver consistent returns.”
McVeigh explained that securitisation and diversification remain key to creating investor confidence. “Our portfolio has over 27,000 loans, with most exposures under $10 million. That diversification, coupled with securitisation and genuine manager co-investment, means the risk of any single obligor impacting outcomes is very slim,” he said. “We put our own capital on the line first. That’s a structural safeguard that resonates with investors.”
For conservative investors, McVeigh said it’s important to match private credit exposure with their own liquidity and risk appetite. “It can be difficult to compare credit funds on the surface. Investors need to ask: what’s in the underlying pool? What’s the rating profile? How liquid is it? If you’re a conservative investor, investment-grade securitised pools with monthly liquidity can deliver steady cash-based returns without high volatility. For those further up the risk curve, diversified or opportunistic funds can deliver higher returns, but investors need to be aware of the additional risks they are taking on.”
Both Connolly and McVeigh see long-term tailwinds supporting the growth of private credit. “Private credit removes the day-to-day noise of markets,” McVeigh said. “It’s about steady, compounding returns over time and we’re only at the beginning of its growth in Australia. With a $3.8 trillion credit market and a superannuation system hungry for yield, there are clear tailwinds behind the sector.”
Connolly added: “The demographic bulge of retirees and the next generation of investors are both searching for income substitutes. Private credit is well placed to meet that need but it’s essential investors look beyond the headline returns and do their homework.”
For more information visit www.investmentmarkets.com.au/podcasts