Private Credit Funds Australia: How Private Credit Investing Works
Private credit, private debt, non-bank lending
Most pages about private credit stop at the product pitch or the definition. This guide follows the questions an Australian investor actually has: what private credit is, what the fund owns, where the return comes from, which fees reduce it, how it differs from a term deposit, what can go wrong, whether money can be withdrawn, how loans are valued, what to read before investing, how to check the operator, what to monitor after investing, and where a complaint goes if something goes wrong. The legal and regulatory points are sourced to primary documents; the page does not rank, recommend, distribute or arrange any fund.
Quick Answer
Private credit is non-bank lending that has been packaged into an investment fund, so the fund makes the loans and investors hold an interest in the fund rather than in any individual mortgage.
| Your question | Short answer |
|---|---|
| What is private credit? | Non-bank lending where loans are not publicly traded or widely issued. A fund pools investor capital and lends it to borrowers directly or through underlying vehicles. |
| What do I actually own? | An interest in the fund, not the individual loan or mortgage. The fund or trustee holds the loans and security. |
| How do investors get access? | Common routes include unlisted managed funds, listed investment trusts and exchange traded funds, with access also shaped by retail or wholesale client classification. |
| What is the minimum investment? | Whatever the manager sets. It is a commercial entry amount, not the same thing as the statutory wholesale-client tests. |
| What does the return number mean? | Target return, distribution rate, net return and total return are different measures. None is a government-guaranteed interest rate. |
| What fees matter? | Potential layers include management and fund expenses, performance fees and borrower-paid fees. The key question is who is paid at every stage and whether the advertised return is before or after those amounts. |
| Is it like a term deposit? | No. A term deposit is a bank deposit that may qualify for the Financial Claims Scheme. A private credit fund is an investment with capital, valuation and liquidity risk. |
| Is private credit safe? | It is not capital-guaranteed. ASIC highlights opacity, conflicts, valuation uncertainty, illiquidity and leverage, and borrowers can default even where loans are secured. |
| Can withdrawals be stopped? | Yes. Redemption rights depend on the vehicle, constitution and liquidity position; registered schemes have a specific statutory regime once they become non-liquid. |
| Who decides what a loan is worth? | The fund values the loan under accounting standards, often using unobservable inputs where no market price exists. |
| What should I compare between funds? | Valuation policy, fee disclosure, liquidity terms, related-party lending, concentration, leverage and the actual loan book matter more than a headline target return. |
| What should I read before investing? | The PDS or information memorandum, target market determination where applicable, constitution, financial reports, investor reports and ASIC register entries. |
| What should I monitor after investing? | Arrears and defaults, loan amendments, concentration, valuations, leverage, redemptions, fee changes and the annual tax statement. |
| How big is the Australian market? | Around $200 billion on the published regulator estimates, with a large real-estate concentration that materially shapes the risk profile of many Australian funds. |
What is private credit, and how is it different from a bank loan?
Private credit is non-bank lending where loans are not publicly traded or widely issued. The key difference from a bank loan is who funds the lending and carries the credit exposure: a private credit fund uses pooled investor capital, while a bank lends from its own balance sheet. ASIC MoneySmart uses the same broad definition and notes that most investors reach the asset class through investment funds.
Also called: private debt, non-bank lending, direct lending. Section three sets out where those terms genuinely mean the same thing and where they do not.
When a bank lends, the deposits fund the loan and the bank holds the risk on its own balance sheet under prudential rules. When a private credit fund lends, investors fund the loan and investors hold the credit risk, with the fund manager in between as the party that originates, prices, monitors and, if it goes wrong, enforces.
That produces a three-way relationship rather than a two-way one. Investors subscribe for units. The fund lends that money out, usually secured against property or business assets, at a rate the borrower agreed to. The borrower pays interest and fees. What is left after the manager's fees, the fund's costs and any credit losses is what reaches investors. Every question worth asking about a private credit fund is really a question about one of those four steps.
The activity is a long-standing part of the Australian finance market. On the credit side it is the same market as private lending and non-bank lenders, viewed from the other end. A borrower experiences it as a lender that moves faster and prices differently from a bank. An investor experiences it as a fund that holds a book of those loans.
What does a private credit fund own, and what do you own?
The fund owns the loans and the security. The investor owns an interest in the fund. Those are two different assets, and conflating them is the single most common error in how this product gets described.
Take a fund that has lent against a commercial property. The asset on the fund's books is a loan contract, plus a registered mortgage over the title, plus whatever else was taken as support, such as a guarantee or a general security agreement. If the borrower stops paying, it is the fund or its trustee that has the right to issue a default notice and enforce. An investor in that fund has no direct relationship with the borrower, no entry on the title, and no separate right to enforce against the property. Whether the security sits as a first mortgage or behind an existing lender as a second mortgage changes the fund's recovery position, not the investor's legal position.
What sits inside the loan book is not uniform either, and two funds using the same label can hold very different risk. MoneySmart sets out four lending strategies a private credit fund may follow, and the strategy is a better guide to what an investor is exposed to than the fund's name is.
| Lending strategy | What the fund lends against | What drives the risk |
|---|---|---|
| Corporate lending | Direct loans to operating businesses | The borrower's trading performance and where the loan sits in the borrower's capital structure |
| Real estate lending | Loans for buying or developing residential or commercial property | Property values, construction delivery and whether a project completes and sells |
| Asset-backed lending | Loans or investments secured by pools of assets such as mortgages, car loans and credit card repayments | Performance of the underlying pool and the position the fund holds within it |
| Debt instruments | Investments in bonds, debentures and similar instruments | Issuer credit quality and, where the instrument trades, market pricing |
The legal wrapper for the arrangement in Australia is normally a managed investment scheme, governed by Chapter 5C of the Corporations Act. In broad terms, a managed investment scheme exists where people contribute money to get an interest in a scheme, the contributions are pooled or used in a common enterprise, and the members do not have day to day control over the operation. Where a scheme of that kind is offered to retail clients, it generally has to be registered with ASIC and operated by a responsible entity, which is a public company holding an Australian financial services licence and which owes duties to members in that capacity.
Two practical consequences follow, and they run through the rest of this page. First, the quality of what an investor holds depends on decisions made entirely by the manager: which loans to write, at what leverage, against what valuation, and what to do when one stops performing. Second, because the underlying assets are loan contracts rather than listed securities, there is no market price to check the manager's work against. That is why the valuation question in section eight is not a technical footnote. It is the mechanism by which everything else becomes visible or stays hidden.
What is the difference between private credit and private debt?
In Australian usage there is no meaningful difference between private credit and private debt. They are two labels for the same activity, and the distinction people expect to find is not there. Where the vocabulary does carry real information is in the narrower terms that sit underneath.
| Term | Same thing, or narrower? | What it actually describes |
|---|---|---|
| Private credit | The reference term | The term the regulator and the market now use most for non-bank lending funded by pooled capital |
| Private debt | Interchangeable | The older label, more common in institutional material. Same activity, different vintage of vocabulary |
| Non-bank lending | Interchangeable | The same lending described by reference to who is not doing it |
| Direct lending | Narrower | Loans originated straight to a borrower rather than bought in a secondary market, so a subset rather than a synonym |
| Mortgage fund | Narrower | A property secured sub-category with its own structures and its own disclosure benchmarks |
| Credit fund | Different axis | A vehicle label rather than a description of the activity, and it may hold traded credit rather than private loans |
| Private equity | Not the same thing at all | Ownership rather than lending. A private credit fund is owed money by the business; a private equity fund owns part of it and is paid last |
The distinction that does matter is between the activity and the vehicle. Private credit is the activity. A fund is one way of packaging it. The same loan can be written by a listed non-bank lender funding itself with wholesale debt, by an unlisted trust funded by retail unitholders, or by a single investor lending directly. The credit risk is similar in each case. The investor's rights, disclosure and exit are not, because those come from the vehicle, not from the loan.
The capital behind the lending comes from somewhere, and the supply side is more varied than the demand side. Superannuation funds, institutional mandates, family offices, high net worth individuals and, increasingly, retail unitholders all sit behind these loans. Anyone approaching it from the borrower's end will find the same market described from the other direction in the guide to private lending in Australia, which explains who the lenders are and how a private loan is written.
How do investors access private credit in Australia?
Through one of three fund structures: an unlisted managed fund bought directly from the responsible entity, a listed investment trust bought on the ASX, or an exchange traded fund. Which structure a product uses is settled long before an investor sees it. ASIC MoneySmart sets out the routes plainly: "most investors access private credit through investment funds. These can include unlisted managed funds or funds that trade on the Australian Securities Exchange (ASX) like exchange traded funds (ETFs) and listed investment trusts (LITs)." The structure determines how money goes in, how it comes out, and what an investor is entitled to be told.
| Structure | How you buy in | How you get out | What disclosure you get |
|---|---|---|---|
| Unlisted managed fund | Application directly to the responsible entity, at the fund's own minimum | Redemption windows set by the fund, which may be gated or suspended | A product disclosure statement and a target market determination if it is offered to retail investors |
| Listed investment trust (ASX) | Buy units on market like a share | Sell on market, subject to liquidity and the price the market offers | Listed entity disclosure, plus a product disclosure statement at the offer |
| Exchange traded fund (ASX) | Buy units on market | Sell on market, with a market maker present | Listed entity disclosure, plus a product disclosure statement |
Property secured mortgage funds, including pooled and contributory structures, are a sub-category of private credit with their own mechanics and their own disclosure benchmarks. They are covered separately in the guides to mortgage funds in Australia and contributory mortgage funds, and are not treated further here.
Whether a particular fund is open to a particular investor depends on the product and on whether the investor is treated as a retail or wholesale client under the Corporations Act. The Act sets the classification tests and the Corporations Regulations set relevant monetary amounts. Retail clients generally receive the retail disclosure framework, including a product disclosure statement and, where applicable, a target market determination. Wholesale clients generally do not receive those retail disclosure protections. AFCA access is a separate question: AFCA generally excludes complaints from sophisticated and professional investors unless they were incorrectly or inappropriately classified, while other wholesale-client complaints can depend on AFCA's Rules and the facts. The detailed classification limbs, including the role of a qualified accountant certificate, are set out in the guide to the wholesale investor certificate.
What is the minimum investment in a private credit fund?
Whatever the manager decides to set, and it is not the wholesale client test. A widely circulated claim, including in AI generated summaries of this topic, is that private credit is a wholesale product with minimum investments starting around fifty thousand dollars. That conflates two unrelated things. A fund's minimum investment is a commercial decision. The wholesale client test is a statutory test that turns on the value of the product acquired, or net assets, or gross income, or professional investor status, and not on an entry ticket at all. On the access point, the regulator's own published position runs the other way. ASIC's Key issues outlook 2026, published 27 January 2026, states that "retail access to private credit and other private market products is expanding, with investment thresholds as low as ~$2,000." Retail access points now exist an order of magnitude below the figure commonly quoted, which is a different fact from anything about eligibility.
The same manager can run substantially the same lending strategy in two vehicles at once. An unlisted trust takes applications directly, prices units at the fund's stated value and allows redemptions in defined windows, which can be gated if too many members ask at the same time. A listed trust holding a similar book trades on the ASX, so an investor gets out by finding a buyer, at whatever price the market sets that day, which need not match the fund's own stated value. The loans behind both can be near identical. The exit is not remotely the same, and that difference belongs to the wrapper rather than to the credit.
What returns do private credit funds pay in Australia?
A private credit fund does not have one standard return, and a headline distribution is not the same thing as a guaranteed investment return. The economic return starts with what borrowers pay in interest and fees, then moves through fund expenses, manager fees, credit losses, cash held inside the fund and changes in the value of the loan book before it reaches an investor.
This is why two funds can advertise similar income objectives and still produce very different outcomes. One may hold mostly senior loans to established businesses; another may be concentrated in property development; a third may invest through an offshore underlying fund. The return number only becomes meaningful once the assets, fees, losses, valuation policy and liquidity terms behind it are understood.
| Number you may see | What it means | What it does not mean |
|---|---|---|
| Target return | An objective or target set by the fund for a future period | A promise, fixed rate or guarantee that the target will be achieved |
| Distribution rate | The cash or income distributed to investors over a stated period | The whole economic return if the unit value also changes |
| Net fund return | Performance after the fund costs and fees included in the manager's calculation | Your personal after-tax return, or necessarily every cost you may incur to buy or sell |
| Total return | The combined effect of distributions and changes in the investment value over the period | A forecast of what the next period will produce |
| Past annualised return | Historical performance restated as a yearly rate over the period shown | Evidence that the same result will continue, especially if the portfolio or credit cycle changes |
How do you tell whether an 8% or 10% private credit return is worth the risk?
Do not judge an advertised private credit return by the percentage alone. A higher target can come from lending to riskier borrowers, taking second-ranking or subordinated security, using higher LVRs, concentrating the portfolio, extending loan terms, charging more borrower fees or using leverage. The useful comparison is the expected net return after all fund costs and realistic credit losses against the probability and severity of losing capital and the time it may take to get money back.
| Return driver | What can increase income | What to check before treating it as attractive |
|---|---|---|
| Borrower credit risk | A borrower that cannot obtain cheaper bank funding may pay a higher interest margin | Financial position, purpose of the loan, repayment source, covenants, arrears and default history |
| Security ranking | Second-ranking, mezzanine or subordinated exposure can command a higher return | Where the fund ranks on enforcement and how much senior debt sits ahead of it |
| Loan-to-value ratio (LVR) | Higher leverage can increase the interest rate charged | Current and stressed LVR, valuation date, valuation independence and the equity buffer below the lender |
| Concentration | A concentrated portfolio may earn strong income while conditions are benign | Largest borrower, project, sector and geographic exposures, not just the number of loans |
| Fees and non-interest income | Origination, extension, exit and other borrower fees can lift gross income | Whether those fees belong to investors, the manager or both, and whether the quoted return is gross or net |
| Fund-level leverage | Borrowing at fund level can amplify the spread earned on loans | Debt facilities, covenants, interest cost and what happens if asset values fall or lenders reduce facilities |
| Liquidity promise | Less liquid funds may offer a higher target return | Lock-up, redemption frequency, notice period, caps, gates, suspension powers and the term of the underlying loans |
Why do investors consider private credit?
The usual reasons are income and diversification away from listed shares and bonds. ASIC MoneySmart also frames the trade-off directly: the possibility of higher income comes with higher credit, valuation and liquidity risk, and the product may not suit someone who needs quick or certain access to capital.
How do private credit fund fees work?
There is no single private credit fee. A fund can have several fee layers, and not every fund charges every layer. The useful question is not only “what is the management fee?” but “who gets paid at every point between the borrower paying the fund and the investor receiving a distribution?”
| Fee or cost | Where it sits | Question to ask |
|---|---|---|
| Management fee | Paid from the fund to the manager for managing the portfolio | Is the quoted return before or after this fee? |
| Performance or incentive fee | May be payable when stated performance conditions are met | What benchmark, hurdle and calculation method applies, and is there a high-water mark? |
| Fund expenses | Administration, custody, audit, legal and other operating costs paid by or allocated to the fund | Which costs sit outside the headline management fee? |
| Borrower-paid fees | Establishment, origination, extension, exit or other fees paid on the lending side | Do those fees belong to the fund, the manager, or are they shared? |
| Entry, exit or transaction costs | May arise when units are bought, redeemed or traded, depending on the vehicle | What does it cost to enter and leave, and is there a buy-sell spread or market spread? |
ASIC's 2025 surveillance shows why the borrower side matters. Only three retail funds in the 28-fund surveillance clearly disclosed in the PDS all sources of loan fees received by the responsible entity, trustee or investment manager. A fee comparison that looks only at the management fee can therefore miss economically important income elsewhere in the structure.
How does a private credit fund compare with a term deposit?
A private credit fund and a bank term deposit are different legal and economic products. A term deposit is a deposit with an authorised deposit-taking institution; a private credit fund is an investment in a managed or listed vehicle whose value depends on the underlying loan portfolio. The headline income rate should therefore be compared only after capital protection, liquidity, fees and source of return have been put beside it.
| Question | Term deposit with an Australian ADI | Private credit fund |
|---|---|---|
| Government guarantee | Eligible deposits can be covered by the Financial Claims Scheme up to $250,000 per account holder per ADI | No Financial Claims Scheme guarantee applies to an investment in the fund |
| What produces the return | A deposit rate promised by the ADI for the agreed term | Borrower interest and fees, less costs, fees and credit losses, plus any change in investment value |
| Capital risk | The depositor has a claim against the ADI, with the FCS applying to eligible deposits within its limits | Investor capital is exposed to borrower defaults, valuation changes, fees and the structure of the fund |
| Access to money | At maturity, subject to the deposit terms and any early-break rules | Under the fund's redemption terms or by selling on market; access may be delayed, gated or suspended |
| Who supervises the structure | The ADI is prudentially supervised by APRA | The fund and its operator sit primarily within ASIC's financial-services and managed-investment framework; the fund is not an APRA-supervised deposit |
If the search begins with “which pays more?”, the comparison is incomplete. The more useful sequence is: what protects the capital, what can delay access, where the return comes from, which fees sit between the borrower and investor, and what happens when a loan stops performing.
Is your superannuation already invested in private credit?
Possibly. ASIC MoneySmart notes that some people hold private credit through their superannuation fund without being aware of it. Whether you do depends on the investment option you hold, and that exposure is different from choosing a single private credit fund directly because it sits inside a broader portfolio selected and monitored by the super fund.
This matters for two reasons that pull in opposite directions, and both are worth holding at once.
The first is that exposure through a large superannuation fund is not the same product as a direct investment in a single private credit trust. It is one allocation inside a diversified portfolio, sized and monitored by an institutional investment team, and it is not redeemed loan by loan. The second is that superannuation is the one part of this market where regulatory reporting is comparatively strong. ASIC's Key issues outlook 2026 makes the point from the other side, recording that "Australia has limited regulatory reporting outside superannuation, meaning constrained supervision and potential heightened risks for investors." Read carefully, that sentence says the money most Australians have in private credit sits in the best supervised corner of it, and the money a retail investor puts in directly does not.
The practical step is short. A super fund can tell a member whether private credit forms part of the option they are in and how large that allocation is, and most publish their portfolio holdings disclosure. That is a question for the fund, or for a licensed financial adviser, and not one this page can answer for any individual.
Self-managed superannuation is a different question again, and a materially more complex one, because it engages both the fund's own investment rules and the client classification tests in the Corporations Act. Where a financial service relates to a superannuation product, section 761G(6)(b) treats the trustee of a self-managed fund as a retail client unless the fund has net assets of at least $10 million, which is a far higher bar than the general wholesale client tests. ASIC has published a no-action position on how providers may classify trustees in some circumstances, and the interaction is genuinely contested at the margins. Anyone weighing it needs advice from a licensed adviser who works in self-managed superannuation, and the client classification limbs themselves are set out in the guide to the wholesale investor certificate and who qualifies.
Can a self-managed super fund invest in a private credit fund?
It can, and three ordinary superannuation rules bite harder on an illiquid asset than they do on a listed one, which is why this question needs an accountant rather than a website.
The first is the investment strategy. The superannuation rules, in regulation 4.09 of the operating standards, require a trustee to formulate, review regularly and give effect to an investment strategy that has regard to the whole circumstances of the fund, including the liquidity of its investments and its ability to discharge its existing and prospective liabilities. The ATO's guidance on SMSF investment requirements puts the same obligation in plain terms. A fund approaching pension phase, with members drawing minimum payments, is making a liquidity promise of its own, and an asset whose redemptions can be gated is the thing that promise collides with.
The second is related party exposure. Where a private credit vehicle is controlled by a member or an associate, the investment is likely to be an in-house asset, and in-house assets are capped at 5 per cent of the fund's total assets. A widely held fund run by an unrelated manager is normally not in that category, but a small private lending trust assembled with people the members know may well be, and the answer turns on control rather than on size.
The third is valuation, and it is the one trustees discover late. An SMSF must report its assets at market value at 30 June each year on evidence that is objective and supportable, and the auditor will ask for that evidence. For an unlisted unit trust that usually means the responsible entity's unit price together with whatever supports it. A fund that has suspended redemptions is not thereby unvaluable, but the gap between a stated unit price and a price anyone could actually realise becomes a live audit question rather than a theoretical one.
Client classification sits over all three. Where a financial service relates to a superannuation product, section 761G(6)(b) treats a self-managed fund trustee as a retail client unless the fund has net assets of at least $10 million, which is a far higher bar than the general wholesale client tests, and ASIC has published a no-action position on classification in some circumstances. The limbs are set out in the guide to the wholesale investor certificate.
How are private credit funds regulated in Australia, and what has ASIC found?
Where a private credit fund is offered to retail clients, it will generally sit inside the registered managed investment scheme and Australian financial services licensing framework, with retail disclosure obligations including a product disclosure statement and target market determination. ASIC's recent private-credit work has focused less on whether documents exist than on whether they give investors useful information about valuations, fees, conflicts, liquidity and credit risk.
One structural point sits underneath all of it. A private credit fund is not an APRA-supervised bank deposit and does not carry the bank-style prudential capital or Financial Claims Scheme protections of an authorised deposit-taking institution. That does not mean the operator has no financial-resource requirements. ASIC requires responsible entities of registered managed investment schemes to meet financial requirements, including net tangible asset requirements; ASIC announced on 30 July 2026 that those thresholds will increase from 1 July 2027. Those operator-level requirements are designed to support orderly operation and transition of a scheme, not to guarantee investor capital against loan losses.
22 September 2025. ASIC released Report 814, Private credit in Australia, an independent expert report prepared for ASIC by Richard Timbs and Nigel Williams. It estimated the market at around $200 billion, approximately half of which is real estate focused finance. On the same day ASIC stated that it "has called on industry bodies to lift their standards across Australia's private credit sector following expert observations on better and poorer practices," and disclosed that it had "already taken action, issuing stop orders on several target market determinations due to poor disclosure and distribution of retail private credit funds" and had "commenced enforcement investigations for instances of more egregious conduct."
5 November 2025. ASIC published Report 820, the findings of a surveillance that ran from October 2024 to August 2025 across 28 private credit funds, listed and unlisted, retail and wholesale, holding approximately $29.8 billion between them. The report set out ten principles covering, among other things, transparency, fees and costs, conflicts of interest, governance, valuations, liquidity and credit risk. Its transparency findings are the sharpest numbers ASIC has put on this sector: "only four of the 28 funds published information about the interest rates or ranges charged to borrowers," and only "three retail funds clearly disclosed in the PDS all sources of loan fees received by the RE/trustee or investment manager." The review also observed five retail funds that had issued loans to related parties of the responsible entity or investment manager.
9 December 2025. ASIC issued a catalogue of key legal obligations for private credit funds, which in ASIC's words "provides a practical reference point and applies to operators of retail and wholesale private credit funds in Australia." For anyone trying to work out what the rulebook actually is, that document is the most useful thing on this list, and it confirms that the retail and wholesale split is the axis the whole framework turns on.
27 January 2026. The Key issues outlook 2026 flagged expanding retail access, and recorded the reporting gap outside superannuation set out in section five above.
18 June 2026. Ahead of 30 June reporting, ASIC put private credit on notice on valuations, following a survey covering 22 managers, 52 funds and around $76 billion in assets under management. Its position was direct: "ASIC expects participants to challenge assumptions and refresh valuations to ensure they are based on realistic and supportable inputs." The same update reported that credit deterioration was emerging unevenly, with pockets of higher defaults, impairments and loan amendments, that redemption requests remained contained in aggregate, and that leverage and line of credit usage remained minimal. ASIC has also said it intends to refresh its regulatory guidance in 2026 and 2027 to reflect the surveillance findings and to give clearer guidance for wholesale funds, and its enforcement priorities now name poor private credit practices expressly.
What the regulator found, in five figures
- $200bnThe estimated size of the Australian private credit market, approximately half of it real estate focused finance. ASIC Report 814, 22 September 2025, and APRA System Risk Outlook, 21 May 2026.
- 4 of 28Funds in ASIC's surveillance that published information about the interest rates or ranges charged to borrowers. ASIC Report 820, 5 November 2025.
- 3Retail funds that clearly disclosed in the product disclosure statement all sources of loan fees received by the responsible entity, trustee or investment manager. ASIC Report 820, 5 November 2025.
- 5Retail funds observed to have issued loans to related parties of the responsible entity or investment manager. ASIC Report 820, 5 November 2025.
- $2,000The level ASIC reports retail investment thresholds for private market products now reaching, which is an access point set by managers and not an eligibility test. ASIC Key issues outlook 2026, 27 January 2026.
General information only, not financial advice and not financial product advice. These are published regulator figures about a market, as at the dates shown. They are not a statement about any fund, any product or any investment, and they do not take your circumstances into account.
The disclosure obligations that sit behind those findings are structural rather than discretionary. A managed investment scheme offered to retail clients must be registered, must be operated by a licensed responsible entity, and must issue a product disclosure statement along with a target market determination that defines who the product is designed for. What REP 820 measured was not whether those documents existed. It was whether they told a reader anything useful.
Are private credit funds safe, and what are the main risks?
Private credit funds are not capital-guaranteed, and investors can lose money if borrowers default, loans are impaired or the fund is forced to recognise lower values. Security can reduce the severity of a loss, but it does not remove credit risk. ASIC MoneySmart highlights five recurring risk areas: opacity, conflicts, valuation uncertainty, illiquidity and leverage.
| Risk | What it means in practice | Where it shows up first |
|---|---|---|
| Opacity | Less transparent than public markets, so what the fund holds, how the loans are valued and how performance is measured can be hard to establish | The product disclosure statement and the fund's periodic reporting, before any loan misses a payment |
| Conflicts | A manager's incentives may not align with an investor's, including keeping fees paid by borrowers rather than passing them through, and lending to related parties | The fee section of the disclosure documents and any related party lending policy |
| Valuation uncertainty | Loans are valued using models and judgement rather than a traded price, so a reported value may not reflect what the asset would actually fetch | The valuation policy, and whether a refresh is triggered by an event or only by the calendar |
| Illiquidity | Money can be locked up for years, and even where withdrawals are allowed there may be delays if the underlying loans cannot be sold quickly | The redemption terms and the gating powers in the fund's constitution |
| Leverage | Some funds borrow themselves, or lend to already indebted businesses, which magnifies losses in a downturn as much as it lifts returns in good conditions | The fund's own borrowing policy, which is often disclosed less prominently than its lending policy |
Two of those risks come with the regulator's own consumer wording, and the wording is worth having exactly. On transparency, ASIC MoneySmart states that "private credit is less transparent than public markets. You may find it hard to get information on what the fund invests in, how loans are valued and how performance is measured." On liquidity it is equally direct: "private credit funds may lock up your money for years. Even when withdrawals are allowed, you might face delays if the loans cannot be sold quickly."
The liquidity point is the one that most often becomes real, and it becomes real in a specific way. A fund that offers frequent redemptions while holding loans that run for years carries a mismatch between what it has promised its investors and what its assets can deliver on demand. That mismatch is normally managed through powers written into the fund's constitution to gate or suspend withdrawals, and those powers exist to protect remaining members from a forced sale of loans at a discount. An investor who reads the redemption terms only after asking for their money back has read them too late.
One further signal is editorial rather than analytical. MoneySmart has placed private credit in a section of its site called complex investment products. A regulator reclassifying a topic is a statement about the level of understanding it thinks the product requires.
| If you need... | Why private credit can conflict with that need |
|---|---|
| Certain access to capital on a fixed date | Redemption windows can be delayed, gated or suspended because the underlying loans are not readily saleable |
| A government guarantee or capital protection | Managed-fund investments are not covered by the Financial Claims Scheme |
| A continuously observable market price | Private loans are commonly valued using models and judgement rather than exchange prices |
| Simple, low-layer fees | Some structures have management, operating, performance and borrower-side fees that require separate reading |
| No tolerance for borrower default | Security reduces loss given default but cannot eliminate the possibility of capital loss |
Switchboard Finance works in non-bank and private lending on the credit side, arranging loans for business owners and property investors who need to borrow. If you have questions about borrowing in this market, you are welcome to get in touch. Questions about investing belong with a licensed financial adviser.
Can a private credit fund stop you withdrawing your money?
Yes, and for a registered scheme the law sets out exactly when. A registered scheme is liquid if liquid assets account for at least 80 per cent of the value of scheme property. Once a scheme is not liquid, a member cannot withdraw except in accordance with the scheme's constitution and sections 601KB to 601KE of the Corporations Act 2001. That 80 per cent test is the line between a right to withdraw and a queue.
Most published material describes this as the fund having a discretion written into its constitution. That is only half of it. Part 5C.6 of the Act is a statutory regime that sits over the constitution, and it changes the shape of an investor's rights rather than merely pausing them.
While the scheme is liquid, a member with a withdrawal right exercises it under the procedures in the constitution. Once the scheme is not liquid, the responsible entity may instead offer members an opportunity to withdraw to the extent that particular assets are available and able to be converted to money in time. Section 601KC allows only one withdrawal offer to be open at any time. Section 601KD governs how payments are made, and section 601KE allows the responsible entity to cancel a withdrawal offer. So the practical position for an investor is not that withdrawals have been refused. It is that the right to ask has been replaced by a wait for an offer that someone else decides whether to make, how large to make it, and whether to cancel.
ASIC uses a specific term for the result. Its guidance for fund operators states that a registered scheme becomes a "frozen fund" when the responsible entity suspends or cancels the ability of members to withdraw from the scheme.
| Question | Registered scheme, retail clients | Unregistered scheme, wholesale clients |
|---|---|---|
| Where do withdrawal rights come from | The constitution, plus Part 5C.6 of the Corporations Act | The constitution or trust deed only |
| Is there a statutory liquidity test | Yes, the 80 per cent liquid assets test in section 601KA | No statutory test applies |
| What happens when the fund cannot pay | Withdrawal offers under sections 601KB to 601KE, one open at a time | Whatever the deed provides, which may be very wide |
| What disclosure did you receive | A product disclosure statement and a target market determination | Usually an information memorandum with no prescribed content |
| External dispute resolution | AFCA, where the provider is a member | Generally unavailable |
A freeze is not automatically evidence that money has been lost. ASIC's consumer guidance on frozen funds and hardship withdrawals makes three points that rarely survive into news coverage. Freezing a scheme is often a prudent measure to protect the interests of all members. It does not necessarily mean the value of investments has fallen, that money has been lost, or that income distributions have stopped. And a freeze can prevent assets being sold below market value in order to meet withdrawal requests, which is a protection for the members who remain. That guidance also sets out a hardship withdrawal path, which is worth reading before assuming there is no way to access money at all.
Behind the freeze sits an obligation the fund carries all along. Under ASIC's liquidity guidance for responsible entities, a scheme is expected to maintain a liquidity management policy so that meeting redemptions does not materially disadvantage the members who stay in. Suspending withdrawals is the mechanism that obligation produces when the alternative would be a forced sale of loans at a discount. It is designed behaviour, not a malfunction, which is exactly why the redemption terms are worth reading before investing rather than after.
Some Australian funds do not originate loans themselves. They invest into an offshore fund managed by a global manager, which means the Australian vehicle's ability to pay redemptions depends on the offshore vehicle's ability to pay it. ASIC made the point directly on 18 June 2026, noting that recent isolated incidents had highlighted how Australian retail investors can be exposed to offshore redemption constraints and liquidity pressures through local feeder structures. In the same update ASIC reported that redemption requests remained contained in aggregate, with higher activity observed in feeder funds investing in global private credit managers. The lesson for a reader is a question rather than an alarm: does this fund make the loans, or does it invest in another fund that does?
Two related situations sit outside the scope of this page and are covered separately. If you are a borrower whose lender is a private credit fund that has suspended redemptions, your loan contract is unaffected by what the fund's investors can or cannot do, but undrawn commitments and the appetite to extend at maturity are a different question, and the borrower side of that is set out in the guide to how private lending works in Australia. If you hold a frozen fund and receive a means-tested payment, the social security treatment of an asset you cannot access has its own rules and belongs with Services Australia or a licensed financial adviser.
How is a private credit loan valued when there is no market price?
It is valued by the fund itself under accounting standards, using inputs that nobody outside the fund can observe. This is the mechanism that makes private credit opaque, and it is worth understanding in its own terms rather than as a general warning about transparency.
The starting point is AASB 13, the fair value standard issued by the Australian Accounting Standards Board. Paragraph 9 defines fair value as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." Where a price like that can be observed, measurement is easy. For a private loan it cannot be, so the measurement falls to what the standard calls Level 3. Paragraph 86 is blunt about what that means: "Level 3 inputs are unobservable inputs for the asset or liability." Paragraph 87 sets the rule and holds the line at the same time: "unobservable inputs shall be used to measure fair value to the extent that relevant observable inputs are not available," and "the fair value measurement objective remains the same, ie an exit price at the measurement date." The absence of a market does not lower the standard. It moves the judgement inside the fund.
Alongside that sits the impairment model in AASB 9, which decides when a loan gets marked down for credit deterioration rather than repriced. A loan moves to lifetime expected credit losses "if the credit risk on that financial instrument has increased significantly since initial recognition." The standard supplies a tripwire for that judgement: "a rebuttable presumption that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due." Rebuttable is doing real work in that sentence. The presumption can be displaced, and the grounds for displacing it are a matter of the fund's own reasoning.
For property secured schemes there is a further layer, because ASIC publishes benchmarks specifically for them. Benchmark 5 in Regulatory Guide 45, republished 5 March 2026, sets out what a mortgage scheme's valuation policy should contain: valuers who are members of a professional body, independence with procedures for conflicts, rotation and diversity of valuers, and independent valuations obtained before a loan is issued and on renewal. Development property is to be valued on both an "as is" and an "as if complete" basis, other property "as is" only, and a further valuation obtained within two months where directors form the view that a decrease in value is likely to cause a material breach of a loan covenant. RG 45.51 asks for "professional valuers who are registered or licensed" and "up-to-date valuations" before security is taken.
Put those three together and the honest summary is this. The number an investor sees is a considered estimate made by the manager, constrained by standards, tested by auditors, and dependent at every step on assumptions the investor cannot see. That is exactly why ASIC's June 2026 intervention was about assumptions rather than about arithmetic. On the credit side, the same valuation questions decide what a lender will advance against a property, which is set out in the guide to what a lender will advance against a property and across the property lending hub.
A development loan in a fund's book passes its interest payment date and nothing arrives. Once the payment is more than 30 days late the standard's presumption is engaged, and the fund has to decide whether the credit risk has increased significantly or whether the delay has an explanation that rebuts it. The security is a partly built site, so the valuation question splits in two: what the site is worth as it stands, and what it would be worth if the project were finished. Neither number is observable, and the gap between them is where the fund's assumptions about time, cost and the eventual sale all live. None of this shows up as a headline event. It shows up, if it shows up at all, as a valuation policy and a disclosure.
How should you compare private credit funds in Australia?
Five comparison points are especially documentable: valuation policy, fee disclosure, liquidity and redemption terms, related-party lending, and concentration. ASIC examined each of these areas in its private-credit surveillance, which makes them a stronger starting point than a league table based only on advertised return.
What are the top private credit funds in Australia?
There is no regulator-approved “top 10” list, and this guide does not rank or recommend funds. A neutral comparison can instead test the same questions across products: what the fund lends to, how concentrated it is, where each loan ranks, who values the assets, what fees are retained by the manager, whether the fund itself uses leverage, how redemptions work and what happens when a borrower stops paying.
What exact numbers and terms should you compare between Australian private credit funds?
Use the same fields for every fund. The aim is to turn marketing labels such as “senior secured”, “first mortgage” or “monthly income” into comparable facts. A strong comparison separates portfolio credit quality, security, fees, valuation and liquidity rather than ranking funds by target return.
| Comparison field | What to compare |
|---|---|
| Net return basis | Is the stated figure a target, distribution rate or historical total return, and is it after management fees, performance fees, fund expenses and credit losses? |
| Loan type and purpose | Corporate, real estate, construction, asset-backed or mixed; refinancing and development loans can behave differently in stress. |
| Security ranking | First-ranking, second-ranking, mezzanine or unsecured; identify what debt ranks ahead and who legally holds the security. |
| LVR and valuation | Portfolio and individual-loan LVRs, valuation date, valuer independence, valuation frequency and revaluation triggers after covenant breaches or stress. |
| Borrower concentration | Largest borrower and top-10 exposures, plus sector and geographic concentration. |
| Arrears, defaults and impairments | Current and historical arrears, non-performing loans, realised losses, impairments, recoveries and loans that have been extended or restructured. |
| PIK or capitalised interest | Whether unpaid interest can be added to the loan balance instead of being received in cash; rising PIK can make reported income look stronger than cash collection. |
| Related-party exposure | Loans to parties related to the responsible entity, trustee, manager, originator or other group entities and how conflicts are governed. |
| Fund leverage | Whether the fund itself borrows, the size and cost of facilities, covenant headroom and whether leverage can be increased without investor approval. |
| Liquidity and redemption | Lock-up, notice period, dealing frequency, redemption caps, gates, suspension powers and whether the assets naturally mature quickly enough to support the promise. |
| Fee economics | Management and performance fees, fund expenses, buy-sell spreads and who keeps origination, extension, exit and other borrower-paid fees. |
| Alignment and governance | Manager or staff co-investment where disclosed, board/responsible-entity governance, valuation conflicts, auditor and any independent oversight. |
| What ASIC measured | What full disclosure looks like | What the regulator found or said |
|---|---|---|
| Valuation policy | An independent valuer, a stated frequency, and a refresh triggered by a covenant breach signal rather than by the calendar alone | RG 45 Benchmark 5, and ASIC's 18 June 2026 call to challenge assumptions and refresh valuations on realistic and supportable inputs |
| Fee disclosure | All sources of loan fees received by the trustee or manager disclosed, and the interest rates or ranges charged to borrowers published | REP 820: 4 of 28 funds published borrower rates or ranges, and 3 retail funds clearly disclosed all sources of loan fees in the PDS |
| Liquidity and redemption | Redemption terms that match the term of the underlying loans, with gating powers stated up front rather than discovered later | ASIC MoneySmart: funds "may lock up your money for years", and delays are possible even where withdrawals are allowed |
| Related party lending | Related party exposure disclosed, governed and separately explained | REP 820 observed 5 retail funds that had issued loans to related parties of the responsible entity or investment manager |
| Concentration | Exposure disclosed by borrower, sector and geography, not only as a portfolio total | REP 814: approximately half the Australian market is real estate focused finance |
Turned around, those five measures become a list of questions, and the questions are the useful form. Every one of them is answerable from documents a fund already has, and none of them asks the reader to form a view about returns.
Ten questions to put to a responsible entity or a licensed adviser
- Who values the loans, how often, and what triggers a valuation outside the normal cycle? Ask whether the valuer is independent of the manager and how valuer rotation is handled.
- What interest rates or ranges are charged to the borrowers in this fund? ASIC found 4 of 28 funds publish this.
- What are every source of fees received by the responsible entity, the trustee or the manager, including fees paid by borrowers? Ask specifically whether borrower-paid fees are passed through to the fund or retained.
- Does this fund lend to related parties of the responsible entity or the manager, and how is that governed? If yes, ask how those loans are priced and who approves them.
- What are the redemption terms, and in what circumstances can withdrawals be gated or suspended? Ask where that power is written down.
- How do the redemption terms compare with the average remaining term of the loans in the book? A gap between the two is the liquidity mismatch in one number.
- What is the concentration by borrower, by sector and by geography? Ask for the largest single exposure as a share of the fund.
- Does the fund itself borrow, and if so how much and on what terms? Fund-level leverage magnifies losses as well as returns.
- How many loans in the book are currently past due or in default, and how are they being treated? Ask how a past due loan is reflected in the unit price.
- Where does this fund sit if a borrower fails, and what happens to my money if the fund itself fails? Ask about the security position on each loan and about the fund's own contingency arrangements.
General information only, not financial product advice. This is a list of questions to put to a licensed adviser or a product issuer, not a basis on which to choose between products, and it does not take your circumstances into account.
Disclosure that carries information
- The interest rates or ranges charged to borrowers are published
- Every source of loan fee reaching the trustee or manager is named
- Valuation policy states who values, how often, and what triggers a refresh
- Redemption terms, gating powers and stress testing are set out in the offer documents
- Related party loans are identified as such
Disclosure that does not
- Borrower pricing described only as a portfolio average, or not at all
- Fees described as a single management fee with other income unquantified
- Valuations referred to as independent with no policy behind the word
- Redemption described as regular, with the gating power in the constitution
- Concentration reported only at the total portfolio level
Default rates, enforcement outcomes, recovery experience and a full pre commitment checklist sit outside the scope of this page and are covered in the guide to private credit investment due diligence. Where a fund lends against property, the loan to value ratio it writes to is the single most informative number in its concentration disclosure.
What should you check before investing in a private credit fund?
Check the legal operator and the product documents before comparing the headline return. The free ASIC registers can confirm that the scheme and responsible entity are real; the PDS, information memorandum, constitution and reports explain what the product does. Neither step tells you whether the investment suits you, which is a question for a licensed financial adviser.
Start with the regulator's own warning about its own licence, because it is the plainest statement available and it contradicts the way an AFS licence number is usually displayed in marketing. ASIC states that "a licence does not mean that ASIC endorses the company, financial product or advice" or that investors cannot incur a loss from dealing with it. Elsewhere on the same site ASIC puts it more bluntly still, saying that holding an AFS licence "does not guarantee the probity or quality of the licensee's services". A licence is a gate the operator passed through, assessed at a point in time. It is not a rating.
| Document or search | What it can tell you | What to look for |
|---|---|---|
| PDS or information memorandum | Strategy, risks, fees, liquidity terms and legal structure | Specific loan types, fee layers, leverage, valuation policy and redemption powers rather than marketing labels |
| Target market determination | For a retail product, who the issuer says the product is designed for and distribution conditions | Investment horizon, liquidity needs, risk tolerance and intended portfolio role |
| Constitution or trust deed | The legal rules of the scheme, including withdrawal and gating powers | Who can suspend withdrawals, how withdrawal offers work and what rights members actually hold |
| Annual financial report and audit | Financial position, accounting policies and audited historical information | Valuation approach, related parties, borrowings, impairments and changes that do not appear in the marketing summary |
| Investor reports | How the current portfolio is behaving between annual reports | Arrears, defaults, loan amendments, concentration, redemptions, leverage and portfolio changes |
| ASIC registers and investor alert list | Whether the registered scheme and responsible entity can be matched to official records | Correct entity names, ARSN, licence authorisations and any warning signs or impersonation mismatch |
How do you verify an Australian private credit fund before sending money?
Match the investment to independent records before relying on a website, brochure or adviser introduction. Verification should connect the product name to the exact legal entity, the responsible entity or trustee, the relevant licence authorisations, the registered scheme and ARSN where applicable, the bank-account or application instructions, and the parties that custody assets or hold loan security. An ASIC registration or AFS licence confirms a regulatory status; it is not an endorsement of the investment.
| Verification step | What to confirm |
|---|---|
| Exact legal entity | Match the product documents, application form, website footer and ASIC records. Similar trading names are not enough. |
| AFS licence and authorisations | Search the responsible entity/licensee and check the licence is current and relevant to the financial services being provided. |
| Registered scheme and ARSN | For a registered managed investment scheme, match the scheme name and ARSN in ASIC records with the PDS and application documents. |
| Responsible entity or trustee | Identify who legally operates or holds the scheme property and who owes the relevant duties; do not assume the investment manager is the legal operator. |
| Custody and security holding | Check who holds cash, assets and mortgage or other security interests, and whether a security trustee or custodian is used. |
| Auditor and financial reports | Identify the auditor and read the latest audited financial report, including valuation, impairment, related-party and borrowing notes. |
| Payment instructions | Verify the payee and bank instructions through a trusted channel using contact details independently obtained, especially if instructions change. |
| Product-document consistency | The PDS or information memorandum, constitution/trust deed, application form and current investor reports should describe the same strategy, fees, liquidity and legal parties. |
- Find the scheme by its ARSN. A registered managed investment scheme has an Australian Registered Scheme Number. Search it and confirm the scheme is registered, that the name matches the offer document, and that the responsible entity named on the register is the entity named in the product disclosure statement.
- Check the responsible entity's AFS licence. ASIC's professional registers search covers AFS licensees and shows what the licence authorises. A licence that does not authorise operating a registered scheme is a mismatch worth asking about.
- Search the banned and disqualified registers for the company and for the people behind it, and check the court enforceable undertakings register while you are there.
- Check the investor alert list. ASIC's investor alert list names entities and websites that are not to be trusted. Absence from the list proves nothing; presence on it ends the conversation.
- Verify the website, not just the name. Imposter websites impersonating genuine licensees are a live problem that ASIC has acted on during 2026, so confirm you are dealing with the real entity through details you found on the register rather than details you found on the site itself.
Then read the product disclosure statement and the target market determination against the ten questions in section ten. Between them the registers tell you the entity is real and the documents tell you what it does, and neither tells you whether it suits you, which is a question for a licensed adviser.
How is income from a private credit fund taxed in Australia?
Private credit fund distributions are generally taxed according to the components attributed or distributed to the investor, rather than simply the cash amount received. For an Australian individual, interest-like income is generally assessable at marginal rates, while capital gains and other trust components can be treated differently. The annual tax statement is therefore more important than the headline distribution rate for working out what goes into a return.
The franking question is the one that catches people, and the answer is structural rather than a matter of the fund's choices. Franking credits attach to franked dividends paid by Australian companies. Interest is not a dividend, so interest income does not carry franking credits, and a fund whose income is predominantly interest will generally pass none through. An investor comparing a private credit distribution with a fully franked dividend at the same headline percentage is not comparing like with like.
What arrives at tax time depends on how the fund is structured for tax purposes. A fund that has elected into the attribution regime is an attribution managed investment trust, and it issues an AMIT member annual statement, usually called an AMMA statement. A fund outside that regime issues a standard distribution statement. Both set out the components of what you received, which is the part that matters, because a single monthly payment can contain several different tax components.
| Component | What it is | Why it matters |
|---|---|---|
| Interest and other assessable income | The share of the fund's income attributed or distributed to you | Taxed at your marginal rate in the year it is attributed, whether or not it was paid in cash |
| Franked amounts | Any franked dividend component, which in a lending fund is usually nil | Franking credits attach to franked dividends, not to interest |
| Capital gains | Gains realised inside the fund and passed through | Reported separately and subject to the capital gains rules rather than as ordinary income |
| Tax deferred amounts | Cash paid to you that is not assessable in that year | Generally reduces the cost base of your units, which affects the gain or loss when you exit |
| Cost base adjustments | Under the attribution rules, an upward or downward adjustment shown on the AMMA statement | Your cost base can move without you buying or selling anything, so the statement has to be kept |
| Amounts withheld | Tax withheld by the fund before payment | Claimed as a credit in your return, so the cash received is not the taxable figure |
One avoidable and expensive mistake sits in that last row. If you do not quote a tax file number, the ATO's rules on withholding from investment income require the investment body to withhold at 47 per cent from payments to a resident. It is refundable, and the ATO publishes a form for a resident investor to reclaim amounts withheld, but the money sits with the Commissioner in the meantime. The same rules note that withholding is not required where a distribution consists only of tax deferred amounts.
Two boundaries are worth naming plainly. This page describes how the components work and does not tell any reader what their tax outcome will be, because that depends on their marginal rate, the fund's own composition and their other income. And the treatment inside superannuation, including a self-managed fund, is different again and is not covered here. Both are questions for a registered tax agent or an accountant, and the fund's own managed investment trust reporting is the starting document for either conversation.
What should you monitor after investing in a private credit fund?
After investing, the job changes from choosing a fund to checking whether the facts that supported the investment are still true. A distribution arriving on time is not enough by itself; the useful signals are changes in the loan book, arrears and defaults, valuations, concentration, leverage, liquidity and redemption activity.
| What to monitor | Why it matters | Where it may appear |
|---|---|---|
| Cash interest collected vs reported distribution | A distribution can continue even while cash collection weakens. Compare interest actually received with income accrued and cash paid to investors. | Investor reports, cash-flow statements and annual accounts |
| Arrears, defaults and non-performing loans | Rising arrears or defaults are direct evidence that borrowers are not paying as originally agreed. | Portfolio reports, impairment notes and manager updates |
| Loan extensions, restructures and amendments | Repeated maturity extensions or covenant waivers can delay recognition of stress rather than cure it. | Loan-status commentary, annual accounts and manager updates |
| PIK or capitalised interest | Interest added to a loan balance can support accounting income without bringing cash into the fund; rising use can be an early warning sign. | Loan-level reporting, accounting policies and impairment notes |
| LVR migration and valuation changes | A rising LVR can mean the borrower equity buffer is shrinking even if the contractual interest rate has not changed. | Valuation reports, portfolio LVR tables and financial reports |
| Valuation frequency and methodology | Stale valuations can delay recognition of deterioration, especially where loans do not trade in a public market. | Valuation policy, auditor notes and responsible-entity reporting |
| Portfolio concentration | One borrower, project, sector or region can dominate losses despite a large headline loan count. | Largest-exposure and sector/geography tables |
| Redemption requests and queues | Rising withdrawal demand can expose a mismatch between investor liquidity and long-dated loans. | Redemption notices, liquidity updates and fund reports |
| Fund-level leverage and liquidity | Borrowing can magnify losses and reduce flexibility; cash and undrawn facilities affect the ability to meet redemptions. | Financial statements, facility notes and liquidity reporting |
| Fees and related-party transactions | Economics or conflicts can change even if the headline management fee does not. | PDS updates, annual accounts and related-party disclosures |
| Annual tax statement | Taxable components can differ from the cash distribution and may affect the cost base of units. | AMMA statement or annual distribution statement |
A useful monitoring habit is to compare each new report with the questions asked before investing. If the fund originally relied on diversification, independent valuations and regular liquidity, the relevant question later is whether those features still exist on the same terms, not whether the monthly distribution has continued.
What can you do if something goes wrong with a private credit investment?
Start by identifying what went wrong and which party was responsible. A problem with the fund, a problem with the advice that led to the investment, and disappointment with investment performance are different issues and can have different complaint paths.
| Problem | First step | What to know |
|---|---|---|
| Disclosure, fees or a redemption request | Raise the complaint with the responsible entity or financial firm through its internal dispute resolution process | If unresolved, AFCA may be able to consider the complaint where the firm is an AFCA member and the complaint falls within its Rules |
| Advice that led to the investment | Complain to the adviser or, usually, the licensee responsible for the advice | An advice complaint is separate from a complaint about the fund operator and may involve different documents and obligations |
| Investment performance alone | Read the product documents and obtain professional advice about the position | AFCA says it generally cannot consider a complaint that only concerns investment performance, although disclosure or misrepresentation issues can be different |
| Management of the scheme as a whole | Obtain legal or financial advice about the available route and consider whether the conduct should be reported to ASIC | AFCA says it generally cannot consider complaints about the management of a fund or scheme as a whole |
| Possible misclassification as wholesale, sophisticated or professional | Raise the classification issue expressly in the complaint | AFCA's current guidance says sophisticated and professional investor complaints are generally excluded unless the investor was incorrectly or inappropriately classified |
| Possible scam, impersonation or changed bank details | Stop payment if possible, contact your bank immediately and verify the entity using independently obtained contact details; report suspected misconduct through the appropriate official channels. | A genuine licence or scheme can be impersonated. Matching the website or email alone is not enough; verify the legal entity and payment instructions independently. |
Keep the PDS or information memorandum, application documents, advice documents, investor reports, correspondence, redemption requests and any representations made before the investment. Those records establish the investment journey and are often more useful in a complaint than a later marketing page.
How big is Australian private credit, and how does it compare overseas?
Australia's private credit market is estimated at around $200 billion by both ASIC's expert report and APRA, with roughly half described as real-estate-focused finance and APRA putting the whole market at about 3 per cent of the size of the banking system. For an investor, the practical point is not the size alone: Australian private credit is unusually property-concentrated, so a fund labelled 'private credit' can carry a risk profile driven heavily by property development, valuation and refinancing conditions.
| Figure | Denominator | What it actually counts | Source and date |
|---|---|---|---|
| Around $200 billion, approximately half real estate focused | Not applicable, a dollar estimate | A whole of market estimate | ASIC Report 814, 22 September 2025 |
| Around $200 billion, roughly 3 per cent | The banking system | A whole of market estimate with a scale ratio attached | APRA System Risk Outlook, 21 May 2026 |
| Around $29.8 billion across 28 funds | Not applicable, a dollar estimate | The funds ASIC reviewed in its surveillance | ASIC Report 820, 5 November 2025 |
| Around $76 billion across 22 managers and 52 funds | Not applicable, a dollar estimate | A later ASIC survey population | ASIC, 18 June 2026 |
The point of that table is what it lets a reader stop worrying about. The two figures of around $200 billion come from two different regulators measuring the same thing and arriving at the same answer, which is genuine corroboration and worth stating. The $29.8 billion and $76 billion figures are sample populations, not smaller estimates of the market, and any account that presents the four as a series showing growth or contraction has misread all of them.
On the international comparison, the prudential regulator answers it in a single sentence. APRA's System Risk Outlook, published 21 May 2026, states that "private credit in Australia differs from overseas in important ways, including being smaller in size and more concentrated in real estate rather than technology." That concentration is the defining feature of the Australian market, and it is where the two regulators describe the same thing in different registers: APRA in words, and ASIC's expert report in a figure, putting approximately half the market in real estate focused finance. The corroboration worth relying on is between the two dollar estimates. The percentages answer different questions and are not two readings of one number.
Which means the borrowers behind these funds are, disproportionately, property borrowers: developers, investors and business owners raising against property. That is a different market from the corporate lending that dominates private credit in the United States, and it is why an Australian private credit fund's risk profile is so often a property risk profile wearing a credit label. The borrower side of that market is set out in detail in the guide to who Australia's private lenders are, on Switchboard's private lending desk page, and, for loans written behind an existing bank facility, on the page covering lending secured behind a first mortgagee.
From the broking desk
Switchboard Finance sits on the credit side of this market, arranging loans for borrowers rather than advising on funds. On the files that cross our desk, the pattern of what reaches a private credit fund rather than a bank is consistent, and it explains a good deal about how these funds are built.
- The deals that arrive are usually shaped by timing or by structure rather than by weakness: a settlement date a bank process cannot meet, a security or ownership structure outside standard policy, or an asset mid transition.
- The documentation asked for is different in emphasis rather than in volume. The exit gets more scrutiny than the historical trading position, because a fund is underwriting how it gets repaid rather than how the borrower has performed.
- Credit decisions are made by people who can be asked questions, and the reasoning is usually explicit rather than scored, which is why the answer can come quickly in either direction.
- A fund's own mandate and redemption profile constrain what it can offer. A fund promising frequent liquidity to its investors cannot comfortably write long dated loans, and that shows up to a borrower as a term limit that has nothing to do with the borrower.
Indicative observations from Switchboard Finance's broking practice as at August 2026, describing what we see on the borrower side of this market. Not a statement about any fund, not an offer, not a quote, and not financial product advice. Every file is assessed on its own facts and on the individual lender's policy.
Private credit is easy to define and harder to evaluate. The investor journey runs through several separate questions: what the fund owns, where the return comes from, which fees sit between borrower and investor, how the product differs from a deposit, what can delay an exit, how an untraded loan gets valued, what the documents disclose, and what changes after money has already been invested.
The distinction to carry away is still the same: the fund owns the loans and security; the investor owns an interest in the fund. The next distinction is just as important: a regular distribution is not the same thing as a guaranteed return of capital.
Frequently asked questions
A private credit fund is a pooled investment vehicle that lends investor capital to borrowers directly or through underlying vehicles. In Australia, many retail-accessible private credit funds are managed investment schemes. The fund or trustee holds the loans and security; an investor owns units or an interest in the fund rather than a direct mortgage over each borrower asset.
Compare the return on the same basis, then compare the loan strategy, security ranking, LVR, borrower concentration, arrears and defaults, valuation policy, fund leverage, related-party exposure, all fee layers and redemption terms. A higher target return is not meaningful without the credit and liquidity risks that produce it.
Common access routes are an unlisted managed fund, a listed investment trust or an exchange traded fund. Unlisted funds are generally entered through an application to the responsible entity, while listed vehicles are bought on market. Access can also depend on whether the product is offered to retail clients, wholesale clients or both.
Yes, some private credit products are available to retail investors and others are limited to wholesale clients. ASIC has noted that retail access to private markets is expanding. The fund's minimum investment is a commercial term; client classification is a separate legal question under the Corporations Act.
There is no single statutory minimum investment for private credit funds. Each manager sets its own entry amount. Do not confuse that commercial minimum with the statutory tests used to classify a client as retail or wholesale. The borrower side of the same lending is set out in the guide to how private lending works in Australia.
Yes, but a private credit fund is not regulated like a bank deposit. Retail managed investment schemes and their responsible entities sit within ASIC's financial-services, managed-investment and disclosure framework. Responsible entities also have financial-resource requirements, including net tangible asset requirements. The investment itself is not protected by the Financial Claims Scheme.
Private credit funds are not capital-guaranteed, so investors can lose money. Security can reduce the amount lost when a borrower defaults but cannot eliminate credit risk. ASIC MoneySmart highlights opacity, conflicts, valuation uncertainty, illiquidity and leverage as key risk areas.
There is no standard private credit return. A fund may publish a target return, distribution rate, net return or total return, and those measures are not interchangeable. The outcome depends on borrower interest and fees, fund costs, manager fees, credit losses, cash held in the fund and changes in the value of the loan book. Property secured structures are covered separately in the guide to mortgage funds in Australia.
Match the exact legal entity, responsible entity or trustee, AFS licence authorisations and, for a registered scheme, the ARSN against ASIC records and the product documents. Also check the auditor, custody or security-holding arrangements and payment instructions. Registration or licensing is not an ASIC endorsement of the investment.
Yes. Borrowers can fail to pay, security values can fall, valuations can be revised and leverage can magnify losses. A first mortgage or other security improves the fund's recovery position but does not guarantee that an investor receives all capital back.
You may have to wait for the redemption process allowed by the fund's constitution and, for a registered non-liquid scheme, the Corporations Act. A freeze is not automatically proof that the fund has lost money; it can also be used to avoid forced asset sales. The exact rights depend on the vehicle and the product documents. Eligibility and the evidence a fund will ask for are set out in the guide to the wholesale investor certificate.
No. The Financial Claims Scheme applies to eligible deposits with authorised deposit-taking institutions within its limits. An investment in a private credit managed fund is not an eligible bank deposit and is not covered by that guarantee. A fuller pre-commitment checklist sits in the guide to private credit investment due diligence.
Private credit is lending done by someone other than a bank, where the loans are not publicly traded, and it works as a three way flow. Investors put money into a fund. The fund lends that money to borrowers, usually secured against property under a registered mortgage, or against business assets. Borrowers pay interest and fees. What remains after the manager's fees, the fund's costs and any credit losses is what reaches investors. The manager sits between the investor and the borrower at every step of that flow.
Private credit has grown because two structural forces meet in it, one on each side of the transaction. On the lending side, capital and prudential rules shape what banks can hold and how they must price it, which leaves creditworthy borrowing a bank will not write at a price the borrower will accept. On the borrowing side there is persistent demand for speed and for flexibility about structure and security, particularly in property, as set out in the guide to private lending in Australia. This says nothing about what any investor might earn.
Private credit lends to a business; private equity owns part of it. A private credit fund is a creditor, so it is owed a defined amount, it is usually secured, and it ranks ahead of the owners if things go wrong. A private equity fund is a shareholder, so its return depends on the business being worth more later and it is paid last. Both are sold through similar structures, which is why they get confused, but they sit at opposite ends of the same capital structure. See the guide to how private lending works.
Possibly, and ASIC MoneySmart notes that some people hold private credit through their superannuation fund without being aware of it. Whether you do depends on the investment option you are in, because private credit sits inside some diversified options and can also be offered as an option in its own right. Your super fund can tell you whether it holds private credit and how large the allocation is, and most funds publish portfolio holdings disclosure. That exposure is a different thing from investing directly in a single registered scheme.
That depends on the fund's own rules and on how the trustee is classified, and classification is more complicated than the general wholesale client test suggests. Where a financial service relates to a superannuation product, section 761G(6)(b) of the Corporations Act treats a self-managed fund trustee as a retail client unless the fund has net assets of at least $10 million. ASIC has published a no-action position covering classification in some circumstances. The limbs are set out in the guide to the wholesale investor certificate, and anyone weighing this needs advice from a licensed adviser working in self-managed superannuation.
Non-bank lending funded by pooled investor capital, and on the published estimates it is a market of around $200 billion, roughly 3 per cent of the size of the banking system. Its distinguishing feature is what it lends against. APRA's System Risk Outlook of 21 May 2026 states that "private credit in Australia differs from overseas in important ways, including being smaller in size and more concentrated in real estate rather than technology". So an Australian fund's risk profile is very often a property risk profile.
ASIC's Report 820, published 5 November 2025, set out the findings of a surveillance across 28 private credit funds holding approximately $29.8 billion, run from October 2024 to August 2025. Its sharpest findings were about transparency. Only 4 of the 28 funds published the interest rates or ranges charged to borrowers, and only 3 retail funds clearly disclosed all sources of loan fees received by the responsible entity, trustee or manager. The review also observed 5 retail funds lending to related parties. The borrower side is set out in the guide to how private lending works in Australia.
ASIC's term for a registered scheme where the responsible entity has suspended or cancelled members' ability to withdraw. A freeze is not the same thing as a loss. ASIC's guidance records that freezing a scheme is often a prudent measure protecting all members, that it does not necessarily mean value has fallen, money has been lost or income distributions have stopped, and that it can prevent assets being sold below market value to meet withdrawals. The same guidance sets out a hardship withdrawal path, and the underlying rules sit in the managed investment scheme provisions of the Corporations Act.
Often yes. A managed fund is a unit trust, and under the attribution rules amounts are taxed in the hands of members for the year they are attributed rather than the year cash arrives, so a reinvested or retained amount can still be assessable. The annual statement, an AMMA statement for an attribution trust or a standard distribution statement otherwise, sets out the components. Keep it, because cost base adjustments shown on it change what you owe when you eventually exit the scheme. Speak to a registered tax agent about your own position.
Generally no, and the reason is structural rather than a choice the manager makes. Franking credits attach to franked dividends paid by Australian companies. Interest is not a dividend, so interest income carries no franking credits, and a fund whose income is predominantly interest will usually pass none through to investors. That matters when comparing a distribution rate against a fully franked dividend at the same headline percentage, because the after-tax outcomes are not comparable. The borrower side of that interest is set out in the guide to how private lending works in Australia.
What sources support this guide?
Every regulatory, legal, accounting and tax claim on this page was checked against a primary source for the 16 August 2026 review. The page deliberately separates statutory tests from commercial product terms, fund-operator financial requirements from bank prudential protection, and target or distribution figures from guaranteed returns. Where a claim could not be verified cleanly, it has been left out rather than approximated.
| Source | What it supports | As at |
|---|---|---|
| ASIC MoneySmart, What is private credit | The definition of private credit as non-bank lending not publicly traded or widely issued; the three access routes; the four lending strategies; the five named risks of opacity, conflicts, valuation uncertainty, illiquidity and leverage; and that some people hold private credit through superannuation without knowing | Updated 18 Jun 2026 |
| ASIC Report 814, Private credit in Australia (Timbs and Williams) | The estimated market size of around $200 billion and that approximately half of it is real estate focused finance | 22 Sep 2025 |
| ASIC media release and progress update, 22 September 2025 | The call on industry bodies to lift standards, the stop orders already issued on target market determinations, the enforcement investigations commenced, and the stated intention to review existing regulatory guidance in 2026 | 22 Sep 2025 |
| ASIC Report 820, surveillance scope and principles | The scope of 28 funds from October 2024 to August 2025 holding approximately $29.8 billion, and the ten principles covering transparency, fees and costs, conflicts, governance, valuations, liquidity and credit risk | 5 Nov 2025 |
| ASIC Report 820, transparency findings | That only 4 of the 28 funds published borrower interest rates or ranges, that only 3 retail funds clearly disclosed all sources of loan fees in the PDS, and that 5 retail funds were observed lending to related parties | 5 Nov 2025 |
| ASIC, Catalogue of key legal obligations for private credit funds | That ASIC has published a consolidated reference to the legal obligations, and that it applies to operators of both retail and wholesale private credit funds in Australia | 9 Dec 2025 |
| ASIC, Key issues outlook 2026 | That retail access to private market products is expanding with investment thresholds as low as approximately $2,000, and that Australia has limited regulatory reporting outside superannuation | 27 Jan 2026 |
| ASIC news item, private credit valuations ahead of 30 June | The expectation that participants challenge assumptions and refresh valuations on realistic and supportable inputs, and the survey population of 22 managers, 52 funds and around $76 billion | 18 Jun 2026 |
| ASIC Regulatory Guide 45, Mortgage schemes | Benchmark 5 on valuation policy: valuer membership, independence and rotation, valuations before issue and on renewal, the "as is" and "as if complete" basis for development property, the two month refresh on a likely material covenant breach, and the requirement for registered or licensed valuers | Republished 5 Mar 2026 |
| Corporations Act 2001 (Cth) and Corporations Regulations 2001 | That section 761G(7) sets the wholesale client tests without stating any amount, that the $500,000 product value amounts sit in regulations 7.1.19(2) and 7.1.24(2), that section 761G(6)(b) sets the $10 million net assets test for self-managed fund trustees, and the Chapter 5C framework for registered schemes and responsible entities | Current, read Aug 2026 |
| AASB 13 Fair Value Measurement and AASB 9 Financial Instruments | Fair value as an exit price at the measurement date, that Level 3 inputs are unobservable, that unobservable inputs are used where observable ones are unavailable while the objective is unchanged, and the rebuttable presumption at more than 30 days past due | Current, read Aug 2026 |
| Corporations Act 2001 (Cth), Part 5C.6 | That a registered scheme is liquid if liquid assets are at least 80 per cent of scheme property, that a member of a non-liquid scheme may withdraw only in accordance with the constitution and sections 601KB to 601KE, and that only one withdrawal offer may be open at a time | Current, read Aug 2026 |
| ASIC, Frozen funds and hardship withdrawals, and frozen funds guidance for responsible entities | The definition of a frozen fund, that freezing is often a prudent measure protecting all members, that it does not necessarily mean value or distributions have been lost, that it prevents assets being sold below market value, and the hardship withdrawal path | Read Aug 2026 |
| ASIC, What is an AFS licence, and AFS licensees | That a licence does not mean ASIC endorses the company, financial product or advice, and that holding a licence does not guarantee the probity or quality of the licensee's services | Read Aug 2026 |
| ASIC professional registers, banned and disqualified registers and the investor alert list | That a scheme's registration, a responsible entity's licence, banned and disqualified persons and flagged entities can all be checked free by any investor | Read Aug 2026 |
| ATO, Withholding from investment income, and Managed investment trusts | That 47 per cent must be withheld from payments to a resident who has not quoted a tax file number, that withholding is not required where a distribution consists only of tax deferred amounts, and the reporting components of a trust distribution | Read Aug 2026 |
| ATO, SMSF investment requirements | That an SMSF investment strategy must have regard to the liquidity of the fund's investments and its ability to discharge its liabilities, and that assets must be reported at market value on objective and supportable evidence | Read Aug 2026 |
| Australian Government Financial Claims Scheme | That deposits with an authorised deposit-taking institution are covered up to $250,000 per account holder per institution, and that investments in managed funds are not covered | Current, read Aug 2026 |
| APRA, System Risk Outlook | That Australian private credit is around $200 billion, roughly 3 per cent of the size of the banking system, and that it differs from overseas in being smaller in size and more concentrated in real estate rather than technology | 21 May 2026 |
| Parliamentary Joint Committee on Corporations and Financial Services, Chapter 2 | That the committee found a case for raising the wholesale investor and client test thresholds had not been established at that time, and recommended a periodic review mechanism rather than a change to the figures | 2024, read Aug 2026 |
| ASIC, Net tangible assets requirement for responsible entities | That responsible entities of registered managed investment schemes have financial-resource requirements including an NTA requirement, and that ASIC announced increased thresholds and annual indexation to commence from 1 July 2027 | 30 Jul 2026 |
| AFCA, investment complaints and investor-classification guidance | That AFCA can consider some managed-investment and advice complaints, generally cannot consider performance-only or scheme-wide management complaints, and generally excludes sophisticated and professional investor complaints unless classification was incorrect or inappropriate | Read Aug 2026 |
Regulator guidance, accounting standards and market estimates all change, and several of the sources above describe a sector the regulator has said is under active review. Every figure on this page is a published estimate or a regulator finding as at the date shown, not a statement about any particular fund. Where a source could not be verified in full it has been left out rather than approximated, which is why some claims commonly made about this market do not appear here at all. Nothing on this page is financial product advice, and it does not take account of anyone's objectives, financial situation or needs.
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