La Trobe Financial's Chief Executive Officer Chris Andrews said private credit isn't the problem. Rather, it's how individual funds are operated. He is calling for greater transparency across the financial markets.
"Private credit is too broad a term to be called the problem," Andrews told Australian Broker.
His comments come as private credit faces renewed scrutiny in Australia’s lending landscape.
Over the winter, the collapse of New South Wales property developer Bathla Group — which entered voluntary administration after accumulating more than $3 billion in debt, much of it owed to private-credit lenders — reignited concerns about the sector.
Market leaders, including Australia and New Zealand Banking Group (ANZ) Chief Executive Officer Nuno Matos, were quick to respond, saying perhaps there isn't enough regulation in the private sector.
Unlike Australia's non-bank sector, private credit firms are not governed by the Australian Securities and Investments Commission (ASIC) giving them greater flexibility in how they lend and invest. Private credit providers can also extend loans worth hundreds of millions of dollars to mid-sized businesses.
To help address these concerns, the Financial Services Council introduced a mandatory private-markets standard for its funds management members in August, with the new requirements set to take effect on 1 July 2027. The industry body formally defined private credit, which includes direct loans from non-bank institutions to businesses; introduced clearer and more consistent rules for valuing investments and reassessing them when necessary; and established disclosure standards aimed at ensuring investors have access to important information about private-market investments.
La Trobe's CEO responded by sending an open letter to the market, addressing the increased attention being placed on property lenders and private credit managers.
"That scrutiny is healthy," he said. "It's true, there are parts of the market that are not regulated. There are regulatory gaps. ASICS is doing a lot to close those gaps and we support those efforts."
But Andrews also argued that not all funds are created equally.
"Two funds can advertise the same target return, describe themselves in identical language, and own entirely different portfolios," Andrews said. "One fund may hold thousands of small, first-mortgage loans across a diversified portfolio. Another may hold a few dozen large positions concentrated across a small number of borrowers, projects or regions. A third may combine senior lending with subordinated debt, equity positions or investments in businesses owned by the manager. They are different investments."
Bathla's financial problems only highlighted the discrepancy when its fallout put thousands of homes and projects in limbo, and revealed how exposed the growing private-credit sector is to property developers.
The fallout of Bathla also prompted questions about the sector's growing role in Australia's lending landscape, particularly how well it is regulated. In August, ASIC Chair Sarah Court said Australia's expanding private-credit market was showing its “first significant cracks” following the collapse.
Meanwhile, private credit continues to grow Down Under as traditional banks tighten lending requirements and become increasingly risk averse. And as traditional lenders pull back, alternative lenders have stepped in to fill the gap.
The numbers tell the story. Globally, the private credit market is expected to exceed $2 trillion USD in 2026, according to Moody's, approaching $4 trillion USD by 2030. Much of the growth stemmed from the Global Financial Crisis, when banks around the world faced increased regulatory scrutiny and began to pull back to manage risk. Since then, the momentum has only increased year-over-year.
Australia is no different. Estimates of the country's private credit assets under management (AUM) were roughly $200 billion AUD at the end of 2024, up from $188 billion AUD the year before. While still modest in comparison to the global private credit market, the figures indicate continued growth in Australia’s private credit sector.
But with rapid growth comes greater attention. Andrews, however, said some of those concerns are overstated.
"The newspapers are full of stories of strife in the sector," he said. "Some funds are frozen, or have added restrictions on top of their normal redemption frameworks. Others are reporting sudden, unexplained spikes in the levels of defaulting loans. Some funds are entangled in opaque corporate structures, or hold substantial proportions of their investments in equity positions, a sure sign of portfolio stress. We are also seeing the re-emergence of related party loans and investor funds being used for the corporate purposes of the manager.
"It is especially alarming to see the apparent panic caused by the collapse of a single home development business in Western Sydney," Andrews continued. "Whilst regrettable, and painful for those affected, it is utterly normal for developers (like all types of borrowers) to experience financial stress periodically and, occasionally, to fail. The only way that such an event could cause problems for a lender (and, more to the point, its investors) is if that lender had lent too much and had taken insufficient care to protect its investors’ capital.
"In every example of lender failure, the warning signs were visible to anyone who asked the right questions," the CEO added.
Those questions include asking how diversified the portfolio is, whether proper due diligence was done on asset quality, how clearly investments and loan structures are disclosed, and how readily investors can access their money.
Andrews said investors and brokers should look beyond headline returns and ask six key questions when assessing a private credit fund.
"We're always happy to talk about these things," he said.
Here are six questions investors and brokers should put to every private credit manager to better understand how a fund operates, where its risks lie and how well investors' capital is protected.
Are the assets senior loans, subordinated loans, developments, equity positions, businesses or related-party exposures?
What is the largest borrower-group exposure? What proportion of the fund is represented by the ten largest positions?
How much of the portfolio, by value, is in arrears, impaired or in default? And how is that changing over time?
Does the fund hold a first registered mortgage? What is the loan-to-value (LVR)? Who performed the valuation, and when was it last reviewed?
Can investor money be used to acquire businesses or support companies in which the manager holds equity?
What resources support withdrawals? And what happens if redemption requests increase significantly?
