Private Credit Funds Surge Amid ASX Listing Slowdown

The Australian financial market is seeing a shift as private credit funds attract nearly $1 billion in capital, while listings on the ASX slow down. Many investors, especially retirees, are searching for higher returns in private markets, but regulators warn that the move comes with risks such as lower transparency and liquidity concerns.

Private markets have expanded rapidly, with fund managers like Realm and MA Financial raising over $600 million this year. Long-standing firms like Qualitas and Gryphon are also looking for more capital, pushing the total value of ASX-listed investment trusts from $6.3 billion to over $7 billion.

Investor appetite has been driven by low interest rates in previous years, which forced many to look beyond traditional assets. Some private credit funds have reported returns above 10% over the past year, far outweighing the 3.8% yield from Australian government bonds. However, financial experts caution that these investments carry greater risk due to the nature of their underlying assets, such as mortgage-backed securities with lower credit ratings.

Regulators are increasingly concerned about the growing $150 billion unlisted market, citing a lack of transparency that could erode investor trust. The shift away from publicly listed companies has also been accelerated by the challenges of maintaining public ownership, with more businesses delisting from the ASX in the past two years than at any time since the early 1990s.

With Australian banks now restricted from issuing hybrid securities, the demand for credit funds is likely to grow. However, investors are advised to assess risk carefully, as not all funds offer the same level of security and return predictability. The overall market trend suggests that private credit is becoming a bigger player, but its long-term stability remains uncertain.

Source: Australian Financial Review, Super Review, Alternative Credit Investor.