Private credit is booming. But one trend is troubling.
Private credit’s rapid growth is pushing fund managers up the risk curve. Deals once seen as too risky are now being done at scale.
Private credit is booming, and with it come risks. ASIC’s recent warning about potential failures in private credit markets should serve as a wake-up call for investors.
While regulators have traditionally taken a “buyer beware” approach, the scale and complexity of private credit may soon demand greater scrutiny. ASIC is already signalling a push for stronger oversight, with tougher disclosure requirements potentially on the horizon.
Private credit has experienced meteoric global growth. Australia, starting from a low base, has contributed to this expansion, with assets under management in Australian private credit funds growing 2.5 times between 2020 and 2023 — from $700 million to $1.8 billion.
The global surge in private credit has followed a familiar pattern: since the GFC, banks have been constrained by stricter lending requirements, reducing their appetite for riskier loans, particularly to small and medium-sized businesses and property developers.
