Private credit

Private credit
Private credit sector told to lift its game
The Australian Securities and Investments Commission (ASIC) has called on the A$200 billion (US$132 billion) private credit industry to address worrying practices. Australia’s corporate regulator said it was concerned about opaque remuneration and fee structures, related party transactions and governance arrangements, valuation practices and inconsistent use of terms for effective disclosure. “Enhanced standards are needed to lift practices across the sector,” Chair Joe Longo said in a media release. ASIC was releasing its latest report on Australia’s public and private markets, Private Credit in Australia, by infrastructure investment executive Richard Timbs and former banker and chief risk officer Nigel Williams. “'While the report highlights some encouraging practices, it also reveals concerning behaviours that fall short of market expectations and more importantly that are inconsistent with existing financial services law,” Longo said. It comes only days after ASIC blocked $20 billion asset manager, Latrobe Financial Asset Management, from raising money through three fixed interest products. ASIC commissioned the review in response to the rapid growth of the sector in Australia, which in turn represents just
Private credit
Goldman, T. Rowe to offer alternative investments
Goldman Sachs and asset manager T. Rowe Price will begin offering alternative investment products to wealthy clients by the end of the year, with retirement accounts set to follow in 2026, executives told Reuters. The plan builds on a partnership announced earlier this month, under which Goldman will take a stake of up to US$1 billion in T. Rowe. Together, the firms aim to broaden access to private assets, including private credit and private equity, for retail investors. The initiative follows an executive order by President Donald Trump allowing 401(k) retirement accounts to include alternative investments. The order potentially opens access to roughly $9 trillion in retirement savings. T. Rowe Price, which manages $1.6 trillion - around $1 trillion of which is tied to retirement - will oversee the new products. Some products will take the form of target-date funds, which adjust allocations as clients approach retirement. These portfolios will carry a small allocation to alternative assets alongside traditional public and liquid investments, with the alternatives’ share reduced closer to maturity. Other products will cater exclusively to high-net-worth clients, offering diversified portfolios that mix privat
Private credit
Prime US borrowers show rising repayment stress
Financial stress is spreading to some of the most creditworthy United States consumers, according to new data from VantageScore, raising concerns that household finances are weakening more broadly. The credit scoring company reported on Monday that late repayments of more than 90 days surged 109% year-on-year among borrowers in the “superprime” category, those with the highest credit scores. Borrowers in the prime category, typically also considered financially secure, saw a 47% increase in late repayments over the same period. Rikard Bandebo, chief economist at VantageScore, told Reuters that while the absolute level of delinquencies remains relatively low, the trend is troubling. “Even though in absolute terms the increase is modest, it shows that even consumers considered the most credit-healthy are also beginning to see some stress with regard to repayments,” he said. The data also showed a rise in late-stage delinquencies across auto loans and mortgages, sectors where defaults usually occur only under significant financial strain. Early-stage delinquencies, defined as payments overdue by 30 to 59 days, are accelerating fastest in these secured loan categories. “Defaults on secured loans, such as mortgages, typi
Private credit
Asia emerges as growth hub for PE as funding gaps widen
The search for fresh opportunities outside of the more saturated markets of the United States and Europe has led global industry players to refocus on Asia-Pacific, now an emerging global hot-stop for private credit – aka non-bank lending. Since emerging as an investment buzzword three years ago, private credit has continued to garner traction as capital markets have evolved and higher traditional bank lending has widened funding gaps in the lending market. The latest data by PitchBook reveals that private credit assets under management (AUM) in Asia rose from virtually zero in 2000 to $62.3 billion in the first quarter of 2024. Data also reveals that the pace of that expansion has accelerated in recent years, with AUM more than doubling from $34.3 billion in 2017 to over $62 billion last year. According to Nicholas Cheng, head of the private markets group at Standard Chartered Global Private Bank, Asia is arguably emerging as a significant private credit growth hotbed. “The growing funding gap, rapid economic growth, increased sophistication of borrowers, and evolving regulations make it fertile ground,” he said. Due to evolving regulatory landscapes and global investors’ search for higher yields, more capital i
Private credit
Merricks Capital Fund gives PC investors liquidity lesson
There’s lots to like about Australia's fast growing private credit – aka non-bank lender - market, especially the commercial real estate (CRE) sub-sector which accounts for the lion’s share of the Australian market. There are covenants requiring minimum performance and maintenance standards, whilst borrowers pay monthly interest, which should ensure minimum future cash flows are maintained. As a result, yields can be attractive given that they should incorporate what’s called the illiquidity premium. This is simply a fancy way of describing the additional return investors require for holding assets that are not easily tradeable or sold on the market. Trouble is when there’s plenty of liquidity, the illiquidity premium often declines as investors reach for yield. However, as investors in the Regal Partners-backed Merricks Capital Partners Fund recently discovered, letting liquidity take a backseat can come back to bite you.No redemption for nowInvestors in Merrick's $1.2 billion flagship fund were recently advised that redemptions would be delayed because there was no ‘unallocated cash’ to distribute to them. Instead, investors who want to redeem funds will be offered a new class of unit and aren’t forced to back any

Private credit
Non-bank home lending keeps rising, says PEXA
With non-bank lending now revolutionising the way Australians borrow and invest, the country’s reliance on big lenders continues to wane. PEXA’s latest Buyer Deposits report reveals that while major banks continue to dominate, smaller banks now account for a little under half of all new residential mortgages. While major banks, building societies, and credit unions remain the primary lenders of choice, its non-authorised deposit-taking institutions (ADIs) – aka non-banks – that have become an increasingly prevalent part of Australia’s residential home loan landscape. For the uninitiated, non-bank lending refers to loans provided by institutions or individuals other than traditional banks. These typically include private money lenders, private mortgage lenders, and personal loan lenders. Unlike banks, these lenders typically do not accept deposits but focus solely on lending and investment activities. Nowhere is the growth of non-banks or traditional banks more evident than in settlement numbers. While the volume of settlements experienced by major banks grew a modest 3.9% in FY24, the volume of new loans settled by non-banks surged 25.3% year on year.Traditional banks turn more people awayReport data reveals that no
Private credit
Unlock lazy, cheap credit — right at your fingertips
With interest rates again on a downward trajectory, getting a decent return on money invested in the bank or on fixed income is becoming tricky. But with Reserve Bank (RBA) rate cuts reducing the cost of borrowing, now could be a more opportune time to contemplate gearing – putting borrowed money to work to make more money – into property, shares or managed funds. But to ensure that borrowing cheap money isn’t the worst decision you’ll ever make, you need to explore some options and decide whether they’re right for you. Gearing is a risky businessFirst the tough love: Gearing is by its nature a risky business. If the value of the investment nosedives, a geared investment will suffer a greater loss than an investment not encumbered by a loan. For example, if an investment value falls by 20%, an unencumbered $10,000 will reduce to $8000. However, factor in the nasty impact of leverage, and a geared $20,000 will decline to $16,000, reducing the original $10,000 to $6000 less the borrowing cost. Still like the idea of gearing, but have no appetite for the risks associated with margin calls that come with borrowing from a bank or broker? ‘One-click’ solutionWhy not consider a handful of financial providers that have
Private credit
Why is private credit booming in Australia?
Private credit is emerging as a popular asset for investors seeking stability, security and attractive returns, according to Capstone Funds director Frances MacDonald. Private credit, also known as private debt or private loaning is an alternative form of finance that is not publicly traded and includes credit held by or extended to privately held companies taking the form of loans, bonds, notes or private securitisation issues. While Australia is lagging behind the U.S. and Europe, with private credit still in its infancy, representing only 10% of the total debt market, MacDonald argues this creates the perfect opportunity to get in on the ground floor. “Locally, we’re seeing a large funding gap, particularly for SMEs and property developers, where traditional banks have either stepped back or can’t meet borrowers’ need for speed and flexibility,” she tells Azzet. “It’s a structural shift, investors are now actively seeking private assets for yield, stability, and security underpinning the shift away from public markets.”Credit: Niche Marketing GroupRecently, at the InvestmentMarkets webinar, MacDonald said 40% of sophisticated investors said private credit is their top allocation priority. This is because private
Private credit
$400bn funding gap is perfect storm for private credit
While the global financial crisis (GFC) reshaped financial markets, one key fallout was bank lending. One of the casualties of banks having to carry much more capital for certain types of lending is small borrowers. Due to regulatory adjustments heralded by Basel III the big four banks have refocused on residential mortgages or very large corporate loans. Simply put, many loans at the lower end of the scale are too unprofitable and labour-intensive for banks to dabble in this sandpit. While that was bad news for SMEs looking to borrow, it created a golden lending opportunity that the Reserve Bank of Australia (RBA) says is worth around $400 billion in Australia alone. This figure – worth around 2.5% of total business lending - represents the gap between what small and medium-sized companies in Australia want to borrow and what’s available to them from the big banks. This explains why a slew of new market entrants have entered the private credit arena. It also explains why ASIC is ramping up its work to improve compliance and transparency. In response to poor behaviour, ASIC is expected to publish a report on private markets and the private lending landscape later this month.Credit: Alex Vyshnikov from PixabayThe