Private Credit in Australasia: Opportunity and Oversight

Investor Knowledge

Private Credit in Australasia: Opportunity and Oversight

Wholesale 1 PIE Trust Returns

As at May 31, 2025

54.78

%

Total Cumulative Return Since Inception is the compounded monthly, distributions after deductions for all charges before tax (Investor PIR = 0%) since the establishment of this fund. Returns are re-invested in this scenario (time-weighted return). Past performance is not a guarantee of future performance. The fund was established 30 June 2022 and made its first investments in September 2022.

23 Jun

Author

Andrew
Dunning

Across Australasia Private Credit has been expanding fast, offering higher yields and stepping into niche lending situations vacated by banks. Average private-debt yields in New Zealand and Australia tend to hover around 9% pa — well above many traditional fixed-income benchmarks.*

Regulators, as you’d expect, are watching closely. Both ASIC and the Reserve Bank of New Zealand (via tougher bank-capital rules) highlight transparency gaps, the possibility of rising defaults and the need for disciplined governance. For investors, the message is clear: the rewards can be attractive, but strong oversight and alignment are essential.

Key Evidence | Why Investors Are Interested

Compelling yields: Private-debt yields of around 9% pa* outstrip most local bond and term-deposit rates.

Funding gaps: Bank retrenchment (capital rules, risk-weightings) creates space for specialist lenders to fund growth businesses and property projects.

Regional growth trend: Multiple new funds launched over the past 24 months, serving super funds, family offices and wholesale investors on both sides of the Tasman.

*See “Further Reading” below for direct article links.

Key Evidence | What Regulators & Critics Highlight

Risk / Concern	Detail
Regulatory spotlight	ASIC has signalled “accelerated” monitoring of Private Credit valuations and disclosure practices; RBNZ is likewise watching developments in non-bank lending.
Potential defaults	Industry leaders interviewed in Is Private Credit in Trouble? expect default rates to rise as the market matures and rates stay higher for longer.
Transparency & valuation	Regulators note inconsistent valuation methods and limited public data compared with listed debt.
Illiquidity & leverage	Higher leverage, bespoke covenants and limited secondary markets can magnify losses if deals sour.

Private Credit Q&A
Deciding Whether It Fits and How Merx Manages the Risks

Question	Answer
1. Why consider Private Credit at all?	It can deliver higher, more predictable income with low correlation to listed markets, particularly as banks step back from certain lending segments.
2. What are the main risks I should weigh?	Illiquidity, valuation uncertainty, higher borrower leverage and the possibility of defaults.
3. How are my interests aligned with the team at Merx?	Merx principals invest meaningful personal capital in this fund and earn performance fees only after investors receive net returns above the hurdle rate — genuine “skin-in-the-game” alignment.
4. What governance safeguards does Merx employ?	A board with directors from a variety of backgrounds oversees strategy. External auditors review annually.
5. How does Merx manage risk proactively?	Pre-funding: rigorous borrower due-diligence, conservative approach to lending from an experienced team of credit investors. Post-funding: regular reviews of portfolio loans and early-engagement protocols at the first sign of stress.
6. Is Private Credit right for my portfolio?	If you’re a wholesale investor seeking alternative income backed by real assets and robust oversight, Private Credit can complement equities and bonds in your portfolio. It should be sized appropriately relative to your liquidity needs and risk tolerance.

Bottom Line

Private Credit offers an appealing combination of yield and diversification, provided it is delivered with alignment, governance and proactive risk management at its core. Those principles sit at the heart of our approach at Merx.

Considering Private Credit? Talk to Merx. We’re upfront about the risks and committed to the governance that keeps them in check.