Private credit continues to expand Down Under, offering new opportunities to borrowers, brokers and lenders alike.
Globally, the private credit market – which includes fewer regulations and direct loans from non-bank institutions to businesses – is valued at roughly US$1.7 trillion. 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. Moody's anticipates the private credit sector will be worth approximately US$3 trillion by 2028.
Australia is no different. Estimates of the country's private credit's assets under management were roughly $200 billion (Australian) at the end of 2024, up from $188 billion the year before. Where many traditional banks have pulled back, non-banks have emerged to offer residential home loans. But unlike non-banks, private credit firms are not governed by the Australian Securities and Investment Commission (ASIC) and in effect have more freedom to lend or invest as they see fit. Often, private credit players offer loans in the hundreds-of-million-dollar range to mid-sized businesses.
"Loans that had been the core of what bank lending was for decades, that were suddenly unable to be serviced by the banks,” Chris Wyke, co-founder and co-chief executive officer of MA Financial, told Australian Broker. "And then you have an aging demographic that wants access to regular income, at maybe higher returns than a bank. And you've got in effect this mix for private credit to thrive. You've got the supply of loans, and you've got the supply of capital, the demand for that."
Not surprisingly, Australian investors and lenders have been eager to tap a market with so much dry powder floating around and the promise of higher returns. Earlier this month, US-based boutique asset manager Monroe Capital expanded in Australia by hiring Galen Fu as director of business development. Last year, asset management giant Ares raised $2.6 billion for a direct lending fund focused on the Australia and New Zealand markets. Also in 2024, Sydney-based Pengana Capital Group launched a private credit fund for retail investors.
"The reason why there has been growth in private credit in the state, and indeed in Australia, is because of this regulatory reform, bit by bit by bit, leading to a supply of deals in the market that you can get pretty good returns, where the banks were probably pricing cheaper when they were doing it themselves," Wyke said.
But private credit's growth has created opportunities for brokers as well.
"What we're also seeing now is credit – more generally outside of real estate – is being brokerised," Wyke said. "There is tremendous growth for brokers around equipment financing, around small business loans. It's opening up. And so I think more and more brokers – with their network in the way in which capital flows, and the way in which banks are now retreating from a lot of activity – the broker is filling the void. And so I think increasingly so, loans are going to be brokerised of all types and all shapes and sizes."
While private credit offers more options to businesses seeking loans, brokers can also benefit by expanding their networks and skill sets. In Australia, more than 74% of borrowers turn to a broker for help with residential home loans. In the commercial space, only about 30% to 40% of loans come through the broker third-party channel. That leaves lots of white space for brokers.
At Pallas Capital, group executive for origination Jason Arnold said the commercial broker market is already expanding. "Brokers are getting a larger share of the commercial finance market," he said.
Pallas, a mid-market real estate private credit firm, typically makes loans between $1 million and $15 million, with a specialty in commercial finance. Arnold added that about 75% of the firm's business volume comes by way of brokers.
"The growth rate of the business has been phenomenal. But more so over the last 12 months," Arnold said. "More corporate clients and individual clients are seeking advisors and brokers for commercial transactions. And as the brokers increase their exposure to the commercial finance market, that automatically helps us increase our volumes.”
In addition to helping brokers expand their network, brokers can also offer clients faster turnaround times with private credit.
Arnold said that a complex construction loan could take between three to four months to get approved from a major bank.
"With us, it could take anywhere from four to six weeks at best. At worst, maybe four to eight weeks," he said. "It can be months. And it could be the difference between not getting funding at all. That's a huge benefit."
Wyke added that lending in industries such as car loans and self-managed super funds are other areas where private credit is growing – and by extension creating business for brokers.
"Not many banks really do auto lending anymore," he said. "Many of the banks on the residential side, it's now more challenging to get non-resident home loans, or home loans for self-managed super funds. That has to find its way into the non-bank lending segment, or the private credit segment."
In the last half a dozen years, MA Financial has built up approximately $5 billion in assets under management in private credit, Wyke said. The Sydney-headquartered global alternative asset manager's portfolio of companies also includes non-bank lender MA Money, which works in both residential and commercial loans; Middle, an online home loan application platform; and aggregator Finsure, which Wyke said "touches one in every 12 home loans in Australia."
"We also see these same trends playing out in the residential lending market, where the banks would like to do these deals, but they have challenges from regulatory capital, from doing them in the way they used to, which presents quite good opportunities for our [non-bank] MA Money platform," he said.
"The themes around the growth in private credit are also the same themes for the growth in non-bank lending in the residential space, because these loan products the banks don't offer themselves anymore," Wyke said. "They come from the non-bank lending space, and that market is opening up. That's why we've experienced quite considerable growth."
