Australia’s private credit market has moved from a specialist corner of finance into the mainstream. For borrowers, it offers flexible capital where bank lending is less available. For investors, it offers exposure to loans that are not publicly traded. The opportunity is real, but so is the need to understand how private credit funds in Australia are structured, how they manage risk and how regulators now view them.
This article looks at what is driving the market, the trends shaping it, and what wholesale investors should check before choosing a fund. For a closer look at property-secured lending, see Navigating Risks in Real Estate Private Credit.
What Is Driving Private Credit in Australia?
Moneysmart defines private credit as non-bank lending where the debt is not publicly traded or widely issued. In Australia, it generally spans three segments.
Private credit spans corporate, asset-backed and real estate lending, with the Australian market particularly concentrated in real estate.
Source: Moneysmart (ASIC); RBA Bulletin, February 2026
The market has grown because it fills a funding gap. Some businesses, property projects and specialist borrowers need capital that does not fit a bank’s standard lending criteria, particularly where loans are complex or time-sensitive. The RBA has noted strong growth in non-bank business lending since 2022, supported by investors such as superannuation funds, insurers, family offices and asset managers.
How Big Is the Private Credit Market?
Because private credit loans are negotiated directly between lenders and borrowers rather than traded on public markets, estimates of the market size vary depending on how it is measured. Comparing Australia with the United States, the world’s largest private credit market, helps put the local market in context.
Australia’s private credit market is a fraction of the size of the US market on both assets under management and loans outstanding, reflecting a sector that is still developing locally.
Sources: RBA Bulletin, February 2026; Federal Reserve FEDS Notes, October 2026. Australian figures converted at the 31 December 2025 exchange rate.
In the US, private credit vehicles held around US$1.9 trillion in assets under management at the end of 2025, with about US$1.5 trillion in loans outstanding. In Australia, estimates range from around A$50 billion in credit outstanding (RBA) to A$224 billion in assets under management (Alvarez & Marsal), with ASIC referring to a sector of around A$200 billion. The figures differ because they measure different things, so it is worth asking what any market-size claim includes.
Even at the higher estimates, the RBA’s March 2026 Financial Stability Review found private credit accounts for less than 2% of financial system assets, a small share of the overall system.
Key Trends Shaping Private Credit Funds
Five themes are defining the next stage of Australia’s private credit market:
- Growing borrower demand: non-bank lenders serve segments where banks may be less active, including SME, automotive and early-stage construction finance.
- More institutional capital: superannuation funds, family offices and offshore managers are deepening the market.
- Real estate concentration: the RBA notes Australian private credit is particularly concentrated in real estate, so property cycles, valuations and construction risk matter.
- Sharper regulatory focus: ASIC’s review highlighted opaque fees, related-party transactions, governance, valuation practices and inconsistent disclosure.
- Competition with banks: private credit can complement the banking system, but also competes for borrowers banks once served.
Together, these trends make the market more useful, but also more demanding. With real estate so central, the property cycle matters: our analysis of where the Australian market sits in 2026 explains why.
What Should Investors Check Before Choosing a Fund?
A headline return target means little without understanding how loans are originated, valued, monitored and recovered. Investors should look beyond yield to the quality of the lending process.
Six questions that help wholesale investors compare private credit funds on the same terms.
Source: FivePearls illustration, drawing on ASIC media release 25-209MR
1. Loan purpose: does the fund lend to businesses, property developers, asset-backed pools or a mix?
2. Security and loan-to-value ratio (LVR): are loans secured, and how conservative are the valuations?
3. Diversification: a fund with many loans across sectors may behave differently from one concentrated in a few large property exposures.
4. Liquidity terms: private loans are not easy to sell quickly, so withdrawal terms should match the loan book.
5. Fees and conflicts: look for clear disclosure of all fees, related-party lending and who benefits from each transaction.
6. Arrears reporting: strong managers explain problem loans early and clearly.
ASIC has said enhanced standards are needed to improve investor confidence and decision-making. Our guides to Risk Assessment in Property Funds and Managed Property Funds in Australia cover these questions in more detail.
Why Investors Are Turning to Private Credit
Private credit gives wholesale investors access to income from loans to businesses and property projects, often secured against real assets and with terms negotiated directly between lender and borrower. Because these loans are generally held to maturity rather than traded, their value is not driven by daily market sentiment, which can help diversify a portfolio beyond listed bonds and shares. Listed vs Unlisted Property Funds explains how that trade-off works.
As with any investment, outcomes depend on the manager. Disciplined underwriting, realistic valuations, diversification and withdrawal terms that match the loan book all help manage risk. Security over an asset supports recovery but does not guarantee it, and investors can lose capital.
The Outlook Favours Discipline
Private credit is likely to remain a lasting part of Australia’s financial landscape. The RBA points to structural drivers including superannuation inflows, diversification into alternatives, offshore managers seeking Australian exposure and family office wealth.
The next phase is likely to reward discipline more than growth. Better disclosure, stronger governance and realistic valuations will matter as much as lending volume. The strongest funds will be those that can explain not only expected returns, but also what could go wrong and how losses would be managed.
Speak With Our Investment Team
Our investment team can explain how our funds are structured, managed and reported on. You can also find more analysis on our Insights page.
Frequently Asked Questions
Private credit is non-bank lending where the debt is not publicly traded. In Australia, it spans corporate lending, asset-backed lending and real estate finance, including construction and development loans.
Estimates of the private credit market in Australia range from around $50 billion in credit outstanding (RBA, December 2025) to $224 billion in assets under management (Alvarez & Marsal, late 2025), depending on how it is measured.
Private credit is growing because it fills gaps in bank lending, while superannuation inflows, family office wealth and offshore managers provide investor capital.
Private credit funds carry credit, liquidity, valuation and concentration risk. Withdrawals may be limited, pricing is less frequent, and security does not guarantee full recovery of capital.
Sources
- Market size estimates, real estate concentration and structural drivers — RBA Bulletin: Recent Changes in Credit Markets, February 2026
- Private credit share of financial system assets — RBA Financial Stability Review, March 2026
- $200 billion sector estimate and areas of concern — ASIC media release 25-209MR
- ASIC review of private credit practices — ASIC Report 814: Private credit in Australia
- Definition of private credit — Moneysmart: Private credit
Important information
FivePearls Property Funds Pty Ltd (ACN 640 328 696) is the Investment Manager and a Corporate Authorised Representative (No. 001321331) of FivePearls Funds Management Pty Ltd (ACN 672 938 582, AFSL 700140), the Trustee. Investments can only be made by wholesale investors through the Application Form accompanying the relevant Information Memorandum.
