Private credit has become one of the fastest-growing corners of global finance, attracting investors searching for income as banks pull back from certain types of lending.

The global private credit market now runs into the trillions of dollars, with some estimates putting assets under management above US$3 trillion.

But as the market grows, so does scrutiny.

Recent developments internationally have highlighted both the opportunity and the risk in private credit.

Investors have begun questioning transparency, underwriting discipline and liquidity in some funds, while regulators and banks have warned about potential vulnerabilities in the rapidly expanding sector.

Within that growth, however, different managers are taking markedly different approaches to structure, governance and investor alignment.

In New Zealand, Merx Private Credit (for Wholesale Investors only†) is one example, built around a deliberately simple idea: alignment between the fund managers and the investors whose capital they manage.

For founder Andrew Dunning, the lessons shaping that philosophy date back well before private credit became a mainstream investment theme.

Dunning spent a decade in one of the country’s largest banks, including senior roles in property finance and commercial lending.

During that time he repeatedly encountered business owners and property investors with credible plans who were unable to secure funding because they fell outside bank credit frameworks.

“A lot of business owners and property investors had the capacity to do what they wanted to do,” he said.

“They had a plan, they had a project in mind, but they didn’t fit the rigid boxes of the bank’s credit criteria. The Bank’s drivers are not necessarily aligned to the realities of operating a small business in New Zealand.”

That experience sparked a shift in his thinking about how lending could work outside traditional bank structures.

In 2013 Dunning began investing his own capital directly in alternative business finance, working with borrowers whose projects made commercial sense but required more flexible structures.

Over time, friends, family members and associates began investing alongside him in a small peer-to-peer lending group. But as the network grew, the model became increasingly complex to manage.

“It was getting quite clunky, with lots of paperwork and administration passing relatively small investments between ourselves,” he said.

The solution was to formalise the model into a fund.

Merx was structured around a few principles Dunning said are critical in private markets.

One is that the fund managers invest alongside the investors whose money they manage.

“We need to have our own money in the fund if we’re going to be looking after it,” he said.

Another is transparency in how revenue flows through the fund.

“All the revenue generated from the loans goes into the fund first, and then the management fee is taken after that.”

Merx also takes a firm stance against lending to related parties, something Dunning said can create conflicts of interest for investors.

Oversight is provided through an independent trustee, which monitors the fund’s activities and compliance with its rules.

The broader rise of private credit has been driven partly by banks becoming more constrained lenders since the global financial crisis.

For Dunning, that has created opportunities to support borrowers who sit outside traditional banking criteria but still represent sound lending opportunities.

Merx focuses primarily on secured lending to New Zealand businesses and property borrowers, often providing short-term finance that helps projects move through time-sensitive stages.

Examples include bridging finance for property investors, working capital support for seasonal businesses, and funding for equipment imports where suppliers require payment before goods are shipped.

For Wholesale Investors only†, the Merx Private Credit Fund is a PIE qualifying Unit Trust and has a target return of 10 percent per annum after fees and before tax.* Actual returns to investors have been above the target level since inception.

Dunning’s view is that the higher returns are sustainable and balanced alongside active management of liquidity and credit risks inherent in private credit portfolios**. “We are very active in sourcing, assessing and managing risks in the portfolio. We have thorough screening and monitoring in place to manage credit risk and aim to keep funds moving to mitigate liquidity risks.” 

The fund focuses on relatively short-duration loans, allowing capital to be recycled multiple times throughout the year.

As global attention on private credit increases, Dunning believes investors should focus on the fundamentals of any fund structure.

He points to three areas in particular: transparency around where income flows, the investment approval process behind each loan, and the degree to which managers are financially aligned with investors.

“Investors should ask where the revenue from the loans actually goes, and how decisions are being made about what the fund invests in.”

While private credit has grown rapidly worldwide, Dunning said his goal for Merx is not simply to scale as quickly as possible.

Instead, success would mean building a sustainable fund that continues delivering steady returns for investors while supporting New Zealand businesses and property projects.

“I’m not trying to build something to sell,” he said.

“I want it to be a well-managed fund that I’d be comfortable having my friends and family invested in.”

“At the end of the day credit has been around forever. You just have to make good loans.”

Important information and disclaimers:

* The 10% target return is a target only, may not be achieved, and is not guaranteed. Investments involve risk, including possible loss of capital. Learn about the risks associated with this investment by reading the Investment Memorandum and consulting your financial advisors.

†Merx Private Credit Fund (the Fund) is only available to persons in New Zealand who qualify as “wholesale investors” as defined in Schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). As a result, the offer is not a regulated offer under the FMCA, and the Information Memorandum is not a product disclosure statement. The disclosure requirements and investor protections that apply to regulated offers do not apply to this offer.

This article has been prepared in connection with a commercial arrangement and should be considered advertising. The information in this article is of a general nature and was current as at February 2026. It is not intended to be regulated financial advice for the purposes of the Financial Markets Conduct Act 2013 (FMCA) and does not take into account your individual circumstances or financial situation. You should seek advice from a licensed financial advice provider before making any investment decision.

** Investments in the Fund involve risk, including the possible loss of capital, and returns are not guaranteed. Any target return is an objective only and may not be achieved. Past performance is not a reliable indicator of future performance. Distributions, withdrawals and redemptions are subject to the Fund’s terms, including liquidity and notice requirements.

The information contained in this article does not constitute an offer of financial products. Any investment in the Fund may only be made on the basis of the Information Memorandum and other relevant offer documentation. Investors should read all materials carefully and consider obtaining independent financial, tax, and legal advice before making any investment decision.