The genuinely wealthy have always invested differently. Not because they take more risk — often precisely the opposite. Family offices, university endowments, and sovereign wealth funds have spent decades allocating meaningfully to assets most retail investors never see: private equity, real assets, hedge strategies, and increasingly, private credit. The question worth asking is why.

Private credit — broadly defined as non-bank lending to corporations, infrastructure projects, and real estate — has grown from a niche strategy into a USD $1.7 trillion global asset class, according to Preqin's 2024 data. In Australia, the retreat of major banks from middle-market lending following APRA's tightened capital requirements created a structural gap. Sophisticated investors moved to fill it, and the returns on offer reflected the opportunity accordingly.

CONCEPTPrivate credit fills the lending gap left by bank regulation — and borrowers pay a premium for that capital access.
WARNINGIlliquidity is real — private credit is not redeemable on demand, and capital can be locked for 5 to 7 years or longer.
KEY IDEANon-correlation to public equity markets is the core portfolio argument — not yield alone.

The structural appeal rests on several foundations. Direct lending typically generates a floating-rate return — often BBSW plus a margin — meaning rising rate environments have historically supported, rather than eroded, income. Preqin data through 2023 showed senior secured direct lending strategies delivering gross returns in the 8–12% range globally, with Australian domestic strategies competitive within that band. These are historical observations, not forward projections.

Indicative Yield Ranges by Asset Class (2023)0%3%6%8%10%Gov BondsIG CreditDirect LendPriv CreditHY Bonds

Portfolio construction is where this asset class earns its place. The RBA has noted that Australian non-bank lending has expanded considerably, with private credit managers now active across SME finance, commercial real estate debt, and infrastructure lending. Because these loans are not marked to public markets daily, volatility in reported returns differs structurally from listed fixed income — a characteristic that institutional investors explicitly value. Those exploring the mechanics of direct lending as an asset class will find the due diligence requirements significant. Understanding the broader private credit landscape and its evolution since the GFC helps contextualise why institutional capital has shifted so decisively, and the mechanics of floating-rate structures explain much of the income behaviour during rate cycles.

The barrier to entry matters here. Most quality private credit strategies require wholesale investor status under Australian law — a minimum $500,000 investment or a qualified accountant's certificate. That threshold exists for a reason: complexity, illiquidity, and manager selection risk are all real. The institutional frameworks exist precisely because these are not passive, set-and-forget allocations.

The banks didn't leave this space accidentally — and what they left behind didn't disappear. It simply repriced for whoever was prepared to hold it.

This content is for educational purposes only and does not constitute financial product advice. Past performance is not indicative of future results. Profit Logic Ltd (ACN 688 669 936) accepts no responsibility for errors or omissions in this content or anywhere on this website. Always seek advice from a licensed financial adviser before making investment decisions.