Private Credit for Wholesale Investors

Private credit is direct lending to businesses and property projects, outside the traditional banks. As banks have stepped back from parts of the lending market, specialist non-bank lenders and institutional credit managers have moved in, and the interest and fees those loans pay flow through to investors as income. For wholesale investors it has become one of the main ways to earn a defensive, contracted return that sits above cash and government bonds, without wearing the day-to-day swings of the share market.

The strategies on Boston Global Wealth's approved list concentrate on senior-secured lending: first-mortgage loans over Australian real estate and senior-ranking loans to established corporate, agricultural and infrastructure borrowers, held at conservative loan-to-value ratios. Every manager is carefully reviewed before it reaches a client portfolio. Private credit is not a term deposit and it is not guaranteed. The trade-off for the higher income is credit risk and reduced liquidity, which is why it suits wholesale and sophisticated investors building income inside a diversified portfolio. This page is general advice only.

What it is

Direct lending: typically senior-secured first mortgages over Australian residential and commercial real estate, and senior loans to high-quality corporate, agricultural and infrastructure borrowers. Loans are originated, underwritten and managed by specialist non-bank lenders or institutional credit managers, with the underlying security and covenants doing the work that a bank's balance sheet once did.

Why investors use it

Three reasons. Income: contracted yields that have generally sat well above term-deposit and government-bond levels. Defensive characteristics: most strategies are floating-rate, so cash flows tend to rise with the cash rate, and capital is supported by real-asset security at conservative LVRs. Diversification: returns have low correlation to listed equities, which can steady a multi-asset portfolio. Returns are indicative only, not guaranteed; capital is at risk and past performance is not a reliable indicator of future performance.

Types of private credit

Real-estate credit (first-mortgage construction and investment loans), mid-market corporate direct lending, asset-backed and specialty finance, and agricultural credit secured against productive land and equipment. BGW leans toward senior-ranking, secured strategies over subordinated or mezzanine risk, so investors sit higher in the capital structure when something goes wrong.

How BGW selects managers

BGW looks for a track record through a full cycle, including downturns, not just recent good years; disciplined origination and underwriting; conservative loan-to-value ratios; transparent arrears and loss history; realistic liquidity terms; and genuine alignment, such as manager co-investment and sensible fees. Managers that do not clear the review do not reach the approved list.

Where it fits in a portfolio

Private credit usually sits in the defensive or income sleeve, complementing or partly standing in for traditional fixed income. It is sized to your liquidity needs and overall risk tolerance, not treated as a whole-of-portfolio bet. How much makes sense depends on your other holdings, income requirements and how long you can leave capital committed.

Liquidity and access

Open-ended funds typically offer monthly or quarterly redemptions, subject to available fund liquidity; closed-end vehicles run three-to-five-year terms with no early exit. BGW clients access strategies through the approved manager panel, most with monthly investment windows. Because private credit is less liquid than listed assets, it is matched to money you do not need at short notice.

Risks to weigh

Higher income comes with real risks. Private credit is not capital-guaranteed. The main risks to weigh before investing:

Credit and default risk. Borrowers can fail to repay. Recoveries depend on the quality of the security and the manager's ability to enforce it, and losses are possible.
Liquidity risk. Redemptions can be paused, gated or queued in stressed markets, and closed-end capital is locked for the term. You may not be able to access your money when you want it.
Valuation risk. The value of the underlying real assets can fall, reducing the security cover behind a loan.
Interest-rate and economic risk. Floating-rate income moves with the cash rate, and an economic downturn tends to raise borrower defaults.
Manager and operational risk. Outcomes depend heavily on the lender's origination, underwriting and workout discipline.
Concentration and leverage. Some funds gear or concentrate in particular sectors or borrowers, which can amplify losses.

Private credit FAQs

What is private credit?

Private credit is lending to companies or property projects by non-bank lenders and specialist funds rather than by banks or public bond markets. Investors earn income from the interest and fees paid on those loans. In Australia it most commonly takes the form of senior-secured first-mortgage loans and senior-ranking corporate loans.

How is private credit different from a term deposit or government bonds?

A term deposit is capital-guaranteed by an authorised deposit-taking institution up to the government guarantee limit; private credit is not guaranteed and your capital is at risk. Government bonds are highly liquid and low risk; private credit is less liquid and carries credit risk. The higher income private credit can offer is compensation for taking those risks.

What returns can private credit provide in Australia?

It varies by strategy, manager and market conditions. Managers publish target or historical yields, but these are indicative only, not guaranteed, and should be read net of fees. Past performance is not a reliable indicator of future performance, and capital is at risk.

Who can invest in private credit in Australia?

The strategies discussed here are generally available to wholesale or sophisticated investors as defined under section 708 of the Corporations Act. A qualified accountant can certify whether you meet the wholesale investor test.

What are the main risks of private credit?

Borrower default and credit losses, reduced liquidity and possible redemption gates, falls in the value of the underlying security, and reliance on the manager's underwriting discipline. Private credit is best sized as part of a diversified portfolio rather than a single large holding.

How liquid is private credit?

Open-ended funds typically allow monthly or quarterly redemptions subject to available fund liquidity, and can pause or queue redemptions in stressed markets. Closed-end funds lock capital for a set term, often three to five years.

General advice only. This information does not consider your objectives, financial situation or needs; consider the relevant disclosure document and seek personal advice before investing. Target returns are indicative only and not guaranteed. Past performance is not a reliable indicator of future performance. Private market investments carry liquidity, valuation and concentration risks and are generally restricted to wholesale or sophisticated investors under section 708 of the Corporations Act.

Private Credit for Australian Wholesale Investors