Vado Private has welcomed a global effort by Moody’s and MSCI to assess credit risk in private credit markets, as the sector attracts increasing investor interest.
The move comes amid strong business lending growth and rising demand for alternative financing in Australia.
“The global private credit industry, estimated at US$2.5 trillion, is solidifying its role as a vital source of finance for businesses by offering faster loans with more flexible terms than traditional forms of business credit from banks,” said Simon Arraj (pictured), founder and responsible manager of Vado Private.
That global growth is expected to continue, with Moody’s projecting the sector will expand to US$3 trillion by 2028, fuelled by its post-GFC rise as banks retreated under regulatory pressure. In Australia, the trend mirrors this momentum, with private credit assets under management reaching $200 billion by the end of 2024 — up from $188 billion the year before.
Moody’s and index provider MSCI have agreed to develop a methodology to assess private credit risk—a move expected to enhance transparency and comparability for investors.
MSCI’s database includes information on over 2,800 private credit funds and more than 14,000 corporate borrowers globally.
“As the market expands, investors will benefit from independent assessments of credit risk, so we welcome the move by Moody’s and MSCI,” Arraj said.
“The need for consistent risk assessment tools will enable investors to better compare private credit investments and allow product providers to provide more transparent information about risk.”
Demand for private credit in Australia remains high, driven by family offices and investors seeking alternatives to volatile equity markets.
“In Australia, there is a strong demand for private credit,” Arraj said. “This demand has been fuelled by family offices looking for investment opportunities and by the instability in the stock market, which has led investors to seek less volatile options like corporate debt investments.”
According to the Australian Private Capital 2025 Yearbook from Preqin and the Australian Investment Council, family offices made up 40% of active private capital investors in 2024, up from 10% in 2020. Superannuation funds also continue to allocate heavily to private markets, with $500 billion in unlisted assets as of June 30, 2024.
“Even with the economic uncertainty, business lending is still growing strongly in 2025,” Arraj said. “According to data from the RBA, business credit increased by 8.6% in the year leading up to March 31, 2025, compared to 7.3% the previous year. In contrast, home lending has grown more slowly, at just 5.7% in March 2025.”
The Reserve Bank has acknowledged the growing role of private credit in meeting the needs of firms with specific financing requirements. According to the RBA, defaults in private credit have been less frequent than those in comparable leveraged loan or high-yield bond markets.
While private credit remains a relatively small part of Australia’s credit ecosystem, business lending growth has outpaced other forms of credit, underlining its importance.
Private credit typically involves direct lending by non-bank asset managers to middle market firms. Most private credit funds are structured as closed-end vehicles, with lock-up periods of up to 5–10 years, making them suitable for institutional and high net worth investors seeking long-term, illiquid exposure.
These structures attract investors like super funds, sovereign wealth funds, insurance companies, and family offices looking for yield and diversification in a high-interest environment.
