For many investors, particularly those aged 50 to 90, the objective isn’t outperformance, it’s financial security. They want their capital preserved, their income to be stable and their risk understood. Whereas many are arriving overexposed to term deposits and underexposed to alternatives that could improve outcomes without taking them outside their comfort zone. Private credit, when carefully structured, fills that gap.

In 2022, a comprehensive review of the Australian private credit landscape highlighted just how important robust due diligence has become. Starting with more than 300 managers, applying filters such as track record, funds under management, and capital return history reduced the pool significantly.

When factoring aspects such as portfolio transparency and risk controls, only a small fraction met the necessary criteria. This level of rigour illustrates the need for advisers and institutional allocators alike to be highly selective in a market that continues to expand in both size and complexity.

Yet the opportunities are real. Portfolios built around short loan durations averaging 11 months since inception, with a weighted average of just five months remaining, are still delivering returns above nine per cent. This isn’t a result of risk-chasing, but of careful portfolio construction and active manager oversight. It’s proof that conservative, short-duration credit can generate strong outcomes without compromising investor expectations.

That said, performance is only part of the picture. Governance is what determines sustainability. In private credit, manager selection is everything. In the absence of public market pricing, advisers need a deep understanding of how managers behave under pressure. Can they enforce covenants? Do they manage related-party risks effectively? Have they navigated defaults without eroding capital? These are not theoretical questions, they’re essential.

As more managers enter the market, the questions of whether we’re seeing a ‘bubble’ emerges. In truth, the surge in offerings reflects demand, not an access of supply. Private credit still accounts for only around 10 per cent of commercial lending in Australia, far behind markets such as the US where it makes up more than 80 per cent. The local market is not overheated; it is rather still early in its evolution.

Regulatory oversight is also maturing. The recent push from ASIC and APRA for product transparency, target market clarity, and improved reporting reflects a broader shift. Products must now demonstrate clearly not just strong returns, but their alignment with client outcomes and clear governance. Advisers, in turn, need to have confidence that the structures they are recommending meet these standards.

Liquidity is often perceived as a drawback, but it is in fact a design feature when matched to the right investor profile. Private credit is illiquid in nature, but that illiquidity is also manageable, and often beneficial when the investment horizon aligns. It becomes a problem only when mismatched with investor expectation.

If the goal is stability, and income-generating assets over a multi-year horizon, then private credit can do the job more efficiently than many public alternatives.

We are also seeing an increasing interest in multi-manager structures, designed to reduce the idiosyncratic risk, add scale, and improve manager oversight. For advisers managing diverse client bases, this kind of framework brings access and control in equal measure.

It is clear private credit is not a universal solution. It won’t replace traditional income assets outright, nor should it. But it is a powerful complement, especially for investors seeking resilient returns in a market that is still navigating uncertainty.

For advice, the path forward lies strongly in education, discipline, and transparency. Manager quality, portfolio design, and liquidity structure must be scrutinised. When done right, private credit offers exactly what today’s investors are asking for: consistency, clarity, and confidence in a world where few asset classes can promise all three.