Private Credit: The Exposure Most Australians Don't Know They Have

Key Takeaways

• A new ABC News report has ASIC openly warning about Australians' exposure to private credit, a market that has grown from roughly $35 billion to $250 billion in a decade and never been tested in a downturn
• Super funds have piled into the asset class, meaning most working Australians now carry exposure they never chose and cannot easily see
• Cracks are showing overseas: a major US private credit firm has limited investor withdrawals this year, and lenders in the US and UK have collapsed
• Physical gold sits at the opposite end of the spectrum: no borrower, no fund structure, no gate between you and your asset

ABC News has just published a report worth your attention: ASIC sounds alarm on Australians' exposure to growing risks in private credit. Regulators are usually careful with their words, so when ASIC commissioner Simone Constant tells the ABC's The Business that "investors could lose money... and that could happen at some scale," it tells you something about what the regulator is seeing behind closed doors.

The asset class in question is private credit: lending that happens outside the banking system, packaged into funds and sold on yield. In Australia it has grown from around $35 billion a decade ago to $250 billion today. That growth happened almost entirely during a period of rising asset prices and easy conditions. As ASIC's Simone Constant put it, the market "hasn't been tested in a downturn."

A promise, at several removes

It is worth being clear about what a private credit investment actually is. You hand over money. A fund lends it to a borrower a bank would not, or could not, lend to on the same terms. Your return depends on that borrower repaying. Between you and the borrower sits a fund manager who values the loans, usually against a model rather than a market price, and who controls when you can get your money back.

That last part matters most. In public markets, bad news shows up in the price the same day. In private credit, bad news shows up when the manager decides it does, and by then the exit may already be closed. As the ABC reports, US private credit firm Blue Owl limited how much investors could withdraw this year after its software loans soured, and two non-bank lenders, US auto lender Tricolor Holdings and UK mortgage lender Market Financial Solutions, have collapsed outright. The pattern is familiar from every credit cycle: the products are described as safe and yield-bearing right up until the redemption requests arrive.

The exposure you didn't choose

For most Australians, the relevant question is not "should I buy private credit?" It is "how much do I already own?" Super funds, large and small, have moved into the sector chasing returns, and the honest answer for many members is that nobody can tell them their exposure with precision. ASIC itself concedes it does not have as much information about the sector as it would like. The Reserve Bank has been making its own inquiries too, which the ABC notes only came to light through Freedom of Information requests. As Verdad's Dan Rasmussen put it in the same report: "The biggest risk I'd be worried [about] if I was in Australia is how much the superannuation schemes own of it. How exposed are they?"

There is a distinctly Australian wrinkle too. Over half of local private lending is concentrated in property development and construction. If the property market wobbles, the loans against it and the super money behind those loans wobble with it.

If you manage your own retirement savings

Those running their own super at least get to answer the exposure question directly, because they choose every asset in the fund. But the same dynamic applies from the other direction: private credit funds have been marketed heavily to yield-hungry investors outside the institutional world, often with headline returns that look compelling next to term deposits. The unstated trade is liquidity and transparency for yield. That trade looks fine until the cycle turns, which is precisely when regulators are now saying, in public, that this market has never been through one at its current size.

Where gold sits in all this

Physical bullion is the structural opposite of private credit. There is no borrower whose fortunes determine what you own. No manager marking your asset against a model. No fund document with a clause allowing withdrawals to be suspended. It is priced in a deep global market every day, and if you hold it allocated, it is simply yours.

None of this is a prediction that private credit implodes. It may muddle through. But the regulator's message is straightforward: a $250 billion asset class, concentrated in property, largely opaque even to the people supervising it, is now woven through the retirement savings of most of the country. Whatever portion of your wealth sits outside that system, in assets that answer to no one's balance sheet, is the portion you fully control. That has always been gold's job in a portfolio, and moments like this are a reminder of why.