Decoding the Dynamics of Private Credit: Growth, Regulation, and Risk in 2025

“A week in politics is a long time,” the saying goes. But in the rapidly evolving world of private credit, according to a panel of industry leaders at Emergence 2025, “a day” can feel like an eternity. This dynamic sector, fresh off a period of significant expansion, is now navigating its next phase amidst regulatory scrutiny and a shifting economic landscape.

Our deep dive into the panel discussion, featuring insights from Salter Brothers, FC Capital, Schroders RF Limited, Altor Capital, and Leftfield Capital Partners reveals a market brimming with opportunity, but one where careful navigation of risk and regulatory developments will be paramount.

A Market in Motion: The Current State of Australian Private Credit

The panel, comprising Yossi Kraemer from Salter Brothers, Christian Brehm of FC Capital, Nicole Kidd from Schroders RF, and Harley Dalton of Altor Capital, collectively painted a picture of a private credit market in Australia that, while experiencing robust growth, is still in its relative infancy compared to global counterparts like the US.

Kraemer noted that while last year saw significant expansion, the sector’s growth has been a longer-term trend, with current market size estimated between $180 billion and $205 billion. The driving forces behind this growth? A confluence of supply and demand factors, including banks becoming more selective in their lending practices due to regulatory pressures (APRA), and increasing appetite from both institutional and private wealth investors seeking alternatives to traditional fixed income. As Kraemer stated, the Australian private credit market is “really experiencing about 7% to 9% growth per annum.”

Brehm offered an international perspective, noting that while Australia’s real estate credit market is relatively mature, the corporate credit side presents significant opportunities for development. Compared to the US and Europe, Australia lacks a deep pool of large-scale corporate credit providers. However, this also presents an “arbitrage” opportunity, with potential for premium pricing in the current environment. Brehm emphasised the need for Australian fund managers to continue educating the market about the nuances of private credit. 

Navigating the Regulatory Landscape: ASIC’s Increased Scrutiny

A key topic of discussion was the recent attention from the Australian Securities and Investments Commission (ASIC), as reported in the financial press.

Kidd welcomed this increased scrutiny, viewing it as a potential “tailwind” for the industry. “I welcome the opportunity to talk more about the space and to sort of dispel some of the myths that you see,” Kidd stated. She emphasised the broad nature of private credit and the importance of transparency for investors to understand the underlying risks. She also noted that “private credit really does offer an interesting…thought bubble for investors to consider.”

Kraemer concurred, highlighting that the very reason private credit has flourished in Australia is due to banks operating under stricter capital constraints imposed by the regulator. This has created space for non-bank lenders to provide bank-like products, often at a higher yield. As he put it, “the reason why private credit began existing in Australia and exists today is because that’s where the banks are not playing.”

The Multifaceted Nature of Risk in Private Credit

The conversation then turned to the ever-present consideration of risk.

For Brehm at FC Capital, the primary concerns revolve around human resources – finding and retaining talent – and meticulous portfolio construction to navigate industry-specific risks. As he explained, “what really keeps us awake is human resources, finding the right people, retaining the right people, finding good Juniors, training them up essentially in our business.” Dalton at Altor Capital highlighted the inherent credit risk and the potential for unforeseen economic shocks.

Kidd pointed to a different set of challenges in the real estate debt space, with delays in planning approvals and bureaucratic processes hindering development timelines and potentially impacting project completion. She noted that “we find a lot of borrowers are almost…Paralysed by delays or additional things that need to happen.”

Dalton emphasised that his firm mitigates credit risk by backing quality businesses with positive tailwinds and, crucially, by taking an active, hands-on approach with their investee companies. He stated, “you’re backing people and you’re backing people to execute on a plan and you…want to make sure that we are across that business and don’t get any shocks.”

Opportunity Abounds: A Landscape Ripe for Selective Lending

Despite these risks, the panellists agreed on one fundamental point: the current market presents an abundance of opportunities.

Dalton stated that Australian banks have “pulled out” of certain lending spaces, creating a void that private credit providers are stepping in to fill, providing crucial growth capital to Australian enterprises. He elaborated, “the banks are not open for business and they need a solution and we want to come in and help those businesses grow.”

Kraemer noted that after 30 years in the industry, he has “never seen so many deals” across both real estate and corporate credit, allowing for a highly selective approach to lending. She remarked, “there is an abundance of transactions and therefore we can really be picky in this market.”