INTHEBLACK November 2025 - Magazine - Page 37
“As private credit expands into the retail space, it’s critical that investors do their
due diligence and understand where the credit risks lie and where we are in the
economic cycle. When conditions tighten, we could see more defaults, especially
among companies that are more exposed.”
JULIA LEE, FTSE RUSSELL
“The money that was allocated to
alternatives was pretty much all going
to private equity,” he says. “It provided
a return of around 17 per cent and it was
exciting. If you only had a small amount
of the portfolio to allocate, that is where
you’d go.”
But the finance system has changed.
“Equity prices are high,” Block says.
“The Australian share market is making
a number more like 10 per cent per
annum … and so private credit has come
to the fore, because it promises something
like eight to 12 per cent, and it can compete
with equities.”
RISK VERSUS REWARD
Like any investment asset class, private
credit comes with risk. In a recent
discussion paper on the dynamics between
public and private markets, ASIC notes
that while private credit “is not yet
systemically important to the Australian
economy, it is at historically high levels”
and is subject to less regulatory oversight
than other sectors.
Julia Lee, head of Pacific client coverage,
index investments group at FTSE Russell,
says concern about elevated risk is largely
due to growth among retail investors.
“Institutional investors have dedicated
teams to assess not just the underlying
business, but also the deal structure,
potential illiquidity and broader risks,”
she says. “As private credit expands into
the retail space, it’s critical that investors
do their due diligence and understand where
the credit risks lie and where we are in the
economic cycle. When conditions tighten
we could see more defaults, especially among
companies that are more exposed to a
downturn in the economic cycle.”
Brooke says that while regulation is
important, warnings of higher risk exposure
in private credit can be “generally overblown”.
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