Private credit risks are back in the headlines. For investors, it is a timely reminder to look beyond the income on offer and ask what is happening underneath.
As many of you know, I have been cautious about private credit for several years. Recent developments have reinforced why lending standards, liquidity and manager quality deserve close scrutiny.
As many of you know, I have been cautious about private credit for several years. Recent developments have reinforced why lending standards, liquidity and manager quality deserve close scrutiny.
In April 2024, I published Now is not the time for investing in private credit.
It prompted some pearl clutching and gnashing of teeth. One person even suggested I should “do my homework”.
I am always someone who does their homework. That is what my clients pay me for.
My concern was straightforward. In a crowded market, with more funds competing for lending opportunities, would every manager maintain their standards? Or would the pressure to grow funds under management lead some to accept greater risks?
My views have not materially changed.
ASIC has identified concerns about governance, valuations, disclosure and conflicts management in private credit. Poor private credit practices are also one of its enforcement priorities for 2026.
That does not mean every private credit fund is a poor investment. It does reinforce the need to assess each manager carefully. To read the full report click here.
My investment views are never static. A flexible mindset is essential.
A couple of years ago, I moved from being a commodities sceptic to increasing resources exposure in client portfolios, particularly copper. The evidence changed, and so did my view.
One day, you might read that I have become enthusiastic about private credit. I just do not believe we are there yet.
I often tell the individuals, families and financial adviser groups I work with that my job is to help them avoid investment potholes. Sometimes that means questioning an investment while everyone else is celebrating it.
One of my favourite Warren Buffett quotes is “only when the tide goes out do you discover who’s been swimming naked”. Sadly, in this sector, I think we are about to find out.
For now, I remain cautious. If you would like an independent assessment of the risks in your portfolio, contact Wealth Differently.
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