Why is Private Credit Growing so Fast?

INSIGHT #4

Private credit has rapidly evolved from a specialist corner of the market to one of the fastest-growing areas of global finance. In Australia, it’s now a multi-billion-dollar segment supporting developers and mid-market businesses that need capital outside the traditional banking system.

So, what’s driving this acceleration from niche to mainstream – and what does it mean for investors?

Banks have stepped back
Market dynamics and regulatory changes have seen Australian and New Zealand banks materially reduce their exposure to real estate financing, creating an opportunity in the lending market. Private lenders have stepped in to fill the gap – offering borrowers speed, flexibility, and certainty, while giving investors access to secured, income-producing opportunities backed by real assets.

Investors are searching for stable, inflation-resilient income
After a decade of ultra-low rates and market volatility, investors are seeking income that doesn’t depend on daily share market movements. Private credit offers just that – predictable, contractual returns typically in the 7-12% range depending on the loan type and security.

Focus on real-world assets
Private credit connects investors directly with tangible parts of the economy – construction, business expansion, and infrastructure. It’s lending underpinned by property, equipment or cash flow, not speculation – and that makes it appealing in a climate of uncertainty.

Transparency and regulation are lifting industry standard
Private credit’s growth has caught the attention of regulators. ASIC’s recent review of the sector emphasised the need for stronger disclosure, independent oversight, and consistent valuation practices. That’s good news for investors – raising the bar for governance, transparency, and fund integrity.

The Australian opportunity
Private credit represents around 15-20% of commercial lending in Australia – far below the 50%+ share seen in the US and Europe. As awareness grows and regulatory clarity improves, institutional investors and super funds are increasing allocations to this maturing asset class.