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Private Credit in Australia: What Members of Super Funds Should Know

Writer: WIF Team
WIF Team
2 days ago
7 min read

In late August, Sydney property developer Bathla Group entered administration owing more than $3 billion (Lin, 2026). Forty private credit funds had lent to the group, with amounts ranging from $1.5 million to $340 million (Taylor, 2026). The collapse has brought attention to private credit, a part of the financial system not many have heard of, yet one that is connected to the retirement savings of most Australians. This article explains what private credit is, why it has grown, what concerns regulators have raised, and what super fund members can do to understand their own exposure. 


What Is Private Credit? 

Australian Securities and Investments Commission (ASIC, 2025) defines private credit as non-bank lending where the loans are not traded publicly. Most of it runs through funds that pool investors’ money and lend it to borrowers, including companies, property developers, and vehicles that package together many small loans, such as car loans. Borrowers pay interest, which the fund passes to investors after fees and costs. The investors include super funds, other institutions, and individuals.

Funds are either “retail” (registered, open to everyday investors and subject to obligations such as product disclosure statements) or “wholesale” (unregistered, limited to sophisticated or institutional investors, and not subject to some of those obligations). Most of the wholesale funds ASIC reviewed lent mainly to the real estate sector. These lenders operate without banking licences and are regulated differently (ASIC, 2025). In particular, the deposit guarantee that protects bank accounts does not apply to them (Moneysmart, 2026). 

It is important to distinguish between exposure through superannuation and investing directly in a private credit fund. Most super fund members are exposed indirectly: their super fund may allocate part of a diversified portfolio to private credit, without the member choosing the individual loans. By contrast, an individual who invests directly in a retail private credit fund is exposed to that fund's particular lending, valuation, fees, and withdrawal arrangements. ASIC identifies superannuation as one of the channels through which Australians are gaining exposure to private assets. (ASIC, 2026)



Why Has Private Credit Grown?

ASIC estimated the market at about $200 billion in late 2025, while more recent media reports put it nearer $250 billion, and the private credit market grew by 540% in the past 10 years in Australia (Kinsella, 2026). After the GFC, stricter rules made banks more cautious about certain types of lending, and non-bank lenders moved into the gap (Chinnery et al, 2024). ASIC links the growth to larger super balances seeking diversification and yield, less bank lending to higher-risk real estate projects, and more retail participation through evergreen and exchange-traded products. 

Supporters argue that private credit provides funding to businesses and projects that banks may not and offers investors diversification away from share markets. Institutional investors, including super funds, have increased their allocations in recent years (ASIC, 2025).



Where the Concerns Lie

For most of its rapid growth, private credit has operated in favourable conditions; however, inflation, supply disruptions and lack of transparency have resulted in growing concerns, with the Bank for International Settlements warning of indications of stress in private credit (Kinsella, 2026). 


Liquidity:  Many funds allow investors to withdraw money monthly or quarterly, while the underlying loans can run for years. If many investors request withdrawals at once, a fund may not be able to sell its loans quickly enough to meet them, and it may pause or limit redemptions. Recently, CVS Lane limited redemptions across two funds with Bathla exposure, and Centuria Bass paused redemptions and applications on two of its private credit funds (Shapiro, 2026). Australia has seen a similar pattern before. During the GFC, Morningstar data showed 71 funds, mostly mortgage funds, had frozen redemptions (Koo, 2008). 


Valuation: Because these loans are not traded publicly, funds set their own valuations, which influence the prices at which investors enter and exit (ASIC, 2025). ASIC’s surveillance found that in some cases the committees approving loans also oversaw valuations, which it said can compromise independence. If a fund's loans are valued too highly, investors entering or withdrawing from the fund may transact at a price that does not fully reflect the underlying risk.


Risk labelling: ASIC has also raised concerns about whether some retail private credit funds are being marketed appropriately to investors. In 2025, ASIC issued an interim stop order against La Trobe's US Private Credit Fund, citing concerns about its Target Market Determination and whether the fund was appropriate for the types of retail investors to whom it was being marketed. The case highlights a broader issue: private credit products can differ significantly in their underlying risks, even when they are presented as relatively conservative income-generating investments.


Property exposure: ASIC (2025) found that most of the eight wholesale funds it reviewed lent to the real estate sector, describing their funding of it as significant. If property conditions deteriorate, the value of loans or the collateral behind them could fall, causing losses for funds and prompting investors to withdraw their money. ASIC (2026) has since flagged that some portfolios have higher exposure to a single developer group or related assets, and that managing this risk is not yet mature in parts of the domestic market. The concern is therefore not only that an individual borrower fails, but that many funds share the same exposure, as the Bathla case shows.


Global links: Private credit is increasingly connected across international markets. ASIC has noted that some Australian feeder funds, which invest in global private credit managers, have experienced higher redemption activity. This means Australian investors can be affected by liquidity pressures in overseas private credit markets, even when the Australian fund itself is not experiencing the same level of stress. In the United States and Europe, ASIC has reported rising defaults, valuation uncertainty, and redemption pressures. These international links are relevant to Australian investors because they can transmit liquidity and valuation pressures across markets. (ASIC, 2026)



What Regulators Have Said

The stress ASIC flagged has become more visible this year. An ASIC snapshot survey from March to May 2026, covering 52 funds holding about $76 billion, found credit deterioration emerging unevenly, redemption requests contained overall, and liquidity buffers tightening.  In late August, ASIC chair Sarah Court said the sector is facing its first real test and is much more lightly regulated than banking (Shapiro et al, 2026). Poor private credit practices are a 2026 ASIC enforcement priority, and the 2026–27 Federal Budget allocated $17.8 million over four years to strengthen governance, supervision, and enforcement of managed investment schemes, including $10.3 million in 2026–27 for ASIC to improve its use of data in supervising the sector. (Australian Government, 2026).



The Counterarguments

It is important to note that not all funds carry the same risk. Private credit ranges from lower-risk lending to higher-risk property development finance, and ASIC (2025) identified better practices at some funds, including monthly valuations, independent oversight, and frequent stress testing. Some managers argue concerns are overstated, and ASIC’s own survey found leverage to be minimal and most funds managing liquidity adequately. Still, super funds have continued to increase their allocations, and the sector has not yet been tested by a severe downturn at its current size.



What Super Fund Members Can Check

Many Australians hold their super in a diversified default option, where private credit is typically one part of a larger portfolio. Members who want to understand their exposure can:

  1. Check their fund’s asset allocation for terms like “private credit”, “unlisted debt” or “alternatives”;

  2. Ask the fund how much it holds and how it values those assets;

  3. Compare fees, as private credit can cost more to access than other asset classes;

  4. Read withdrawal terms and risk ratings carefully before investing directly in a retail private credit fund.


Private credit is now a significant part of Australia's financial system, and superannuation means many Australians have some indirect exposure to it. The Bathla administration has highlighted risks that can be difficult to see in an asset class where loans are not publicly traded and where valuations and liquidity depend heavily on fund managers. At the same time, private credit serves a legitimate financing role and not all funds have the same risk profile. For super fund members, the key question is therefore not simply whether their fund invests in private credit, but how much it invests, what types of loans it holds, how those loans are valued, and how the fund manages liquidity and risk.



Until next time, 

WIF 💙 

Written by Loshantti Thirukumar 


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