What every adviser needs to know about private credit scrutiny

You can read coverage of this blog also at Financial Newswire.

If it feels like ‘private credit’ is suddenly everywhere, and you’re not imagining it. The asset class has moved from niche to mainstream – appearing in headlines, fund launches, and investment panels across the country. But why now? What’s driving the attention, what sets serious institutional lenders apart from the noise, and what do advisers needs to know to guide their clients through the asset class?

Private markets in Australia are becoming increasingly popular because investors are seeking alternatives to traditional equities and bonds amid ongoing market volatility. The sector’s strong risk-adjusted returns, income stability, and growing accessibility through institutional-grade funds have made private credit and private equity highly attractive to both wholesale and retail investors.

Private credit – essentially non-bank lending to businesses and property developers – has grown into one of the most dynamic asset classes globally. In the US and Europe, private credit markets have become fundamental to economic growth. Australia is now catching up fast.

From the shadows to centre stage

Since the global financial crisis, traditional banks have steadily reduced their exposure to parts of the commercial real estate and mid-market corporate sectors, constrained by tighter capital requirements. That withdrawal has left a significant funding gap. Into that gap have stepped non-bank lenders.

For advisers navigating this space, manager research is critical. Finding a manager that aligns with the goals of your practice and the plans of your clients is vital.

Why now? Australia’s inflection point

Australia’s non-bank lending market has reached a tipping point. Non-bank lenders now represent around 16% of all commercial real-estate lending, up from roughly 4% five years ago, and forecasts suggest that share could double again by 2030.

There are three structural forces are driving this momentum:

• Institutional capital flows: Global investors and super funds are allocating more to private credit mandates seeking stable, inflation-resilient returns in the 7–12% p.a. range.
• Borrower demand: Developers and mid-market sponsors value speed, flexibility, and certainty of execution – traits the big banks struggle to offer.
• Economic resilience: Even through rate volatility, well-structured, first-mortgage credit continues to deliver reliable income and real-asset backing.

It’s this confluence that’s propelling private credit into the mainstream of Australian finance.

Transparency – the defining difference

As ASIC, research agencies and platforms sharpen their focus on the private markets, transparency has become the key differentiator between lenders. Many funds operate opaquely, without independent valuations or external oversight. This has been a clear focus for ASIC.

The risks within private credit typically lie with a borrower’s inability to repay the loan. Should a loan go into default, and the lender is forced to ‘step-in’ and sell the asset, the risk for investors is that the amount that the lender ultimately sells the asset for is less than the amount owed by the borrower.  When this happens, this is what leads to losses for an advised client.

Advisers who are looking to start or grow their allocations to private credit can alleviate this by focusing on experienced private credit managers who have a strong track record of managing loans, and by insisting on receiving frequent updates on the loan book as part of their relationship with the manager.

External valuations are essential for wealth advisers because they provide confidence that every asset is independently verified and accurately priced. They also remove bias and conflicts of interest, ensuring advisors can rely on transparent, market-validated information. This independence strengthens client trust and supports more informed investment recommendations.

Separating fact from fiction

Private credit isn’t a magic wand for high returns. Like any asset class, its performance depends on discipline across loan selection, portfolio monitoring, and capital preservation.

Good management of a private credit account means the manager being hands on with the lender as the project progresses. It also includes being aware of external threats that may impact a project so timelines can be adjusted as required. It is also important to know what your advised clients will want to know, so you can ensure the reporting from your manager meets your needs.

The road ahead

Private credit in Australia is not a fad; it’s a structural evolution. As banks continue to step back and investors seek transparent, income-producing alternatives, the sector’s role will only expand.

For borrowers, it means access to flexible capital that drives economic activity. For investors, it’s a pathway to real, secured, inflation-resilient income. And for the industry, it’s an opportunity to prove that private markets can be transparent, responsible, and investable at scale.

For advisers, finding the right private credit manager is the most important thing. Like any investment, it requires due diligence from the adviser on a potential manager. Finding the right partner will enable your clients to participate in the growth pf private markets, while bypassing the well documented issues within the asset class.