Why the next decade for private credit may look very different and what Australian advisers should watch for

For Australian advisers and wealth managers, private credit has become shorthand for a maturing US market: crowded sponsor-led lending, tighter spreads, more covenant-lite structures and the occasional headline default that raises uncomfortable questions about underwriting discipline.

On the FT Live’s recent webinar “Asia’s Private Market Boom: Capital, Scale and Innovation ” Privity Credit’s Managing Partner Atiya Habib argued that Australia’s opportunity set is increasingly tied to a different private credit story, one being shaped by demographics, infrastructure build-out and a bank-dominated credit system that still leaves plenty of room for specialist lenders. The result is a region where private credit is less “productised” and more deal-by-deal: bespoke, locally structured and often priced with a meaningful premium.

1) The macro tailwinds are structural, not cyclical

Asia’s private credit’s growth runway is a function of three long-duration drivers:

1. Higher trend growth: APAC economies, on average, are growing materially faster than the US and Europe. Faster nominal growth tends to expand financing needs across corporates, consumers and infrastructure.
2. Middle-class expansion: By 2030, APAC is expected to have ~3.5 billion people in the middle class. That transition requires credit to fund housing, consumption and the ecosystem of services around it, not just “big company” borrowing, but the financing of everyday economic activity.
3. Urbanisation and infrastructure: Asia’s urban population scale is unmatched, with ~2.8 billion people living in cities, alongside an estimated US$26 trillion in infrastructure investment required over the next five years.

For advisers, the key point isn’t whether each number is precise. It’s that the region’s credit demand is being pulled forward by demographic and development momentum, the kind of multi-year tailwind that can support repeatable lending opportunities rather than one-off dislocations.

2) Asia is still bank-driven which is exactly why private credit has headroom

A core difference is Asia’s credit is still largely provided by banks and sovereign-linked channels. Across APAC, private credit accounts for less than 10% of credit provision, versus roughly 60–70% in the US and 45–50% in Europe.

The US is ~60% of global private debt while representing ~30% of global GDP; Asia is ~35% of global GDP but only ~7% of global private debt i.e. private debt penetration and economic scale are badly out of sync implying decades of “catch-up” potential if the ecosystem continues to develop.

This matters for Australian allocators because market crowding is a silent return killer. In heavily competed segments, lenders often become price takers. In underpenetrated markets, specialists can still win mandates by solving problems banks don’t solve well: speed, structuring flexibility and customised collateral packages.

3) Pricing, structure and downside protection: where the “Asia premium” comes from

Asia’s appeal isn’t just yield but rather the combination of yield and structure. Pricing differentials can reach 400–500 bps versus US opportunities, with Asia private credit typically more covenanted and collateralised, with deals tailored to specific downside risks.

The subtext is important for advisers: “higher yield” may  mean “higher risk,” but it can also mean a “less commoditised market.” In a bespoke lending environment, return isn’t only a function of rate; it’s also a function of enforceable security, covenants that trigger early intervention and the manager’s ability to restructure when needed.

4) Australia’s role inside APAC is bigger than many investors realise

Australia and India are currently the two largest drivers of APAC direct lending growth, each accounting for roughly 40% of volume (in the context of mid-to-large cap bilateral lending with governance and security structures).

Within Australia, excluding property lending, there are two themes advisers should track:

1. Non-property corporate direct lending is expanding quickly and becoming more embedded in corporate funding stacks.
2. Consumer asset backed securities (ABS) / structured credit is evolving rapidly. Australia’s ABS market has historically been dominated by mortgages, but over the last three years Australia has increasingly led the region in originating and structuring consumer-led ABS, including activity that extends beyond domestic markets.

For advisers, this is a useful reframing. Australia isn’t just “another developed market” within APAC. Rather, it’s becoming a structuring hub for parts of the region’s private credit evolution, particularly in consumer finance and warehouse-style facilities.

5) Fragmentation is both the risk and the diversification benefit

Asia is a heterogeneous market: multiple countries, legal regimes, bankruptcy frameworks, capital controls and enforcement realities.

That fragmentation creates complexity, but it also creates diversification potential. For example, dislocations can be localised (e.g., China property) while other parts of the region remain healthy (e.g., India at different points in its cycle). The implication is that an Asia credit portfolio can rotate exposures by geography and sector as different markets move through different phases of the credit cycle.

This means that “boots-on-the-ground capability” matters. In jurisdictions with capital controls or weaker insolvency processes, you can’t spreadsheet your way to certainty. You need local structuring expertise, enforceability knowledge and credible pathways for repatriation of capital.

6) Regulation is moving with Australia setting the pace

On the regulatory side, APAC’s diversity makes harmonisation difficult, but Australia has been an early mover on disclosure and valuation expectations, particularly because private credit is accessed indirectly through a deep retirement system (superannuation) and a large wealth channel.

It’s also worth noting that regulators tend to like private credit when it reduces systemic banking risk and better matches asset liquidity with investor capital. But scrutiny is increasing due to (1) “circular risk” where banks finance private lenders higher up the stack, and (2) growth in semi-liquid wealth vehicles that reintroduce liquidity mismatch.

For advisers, that’s a practical reminder: as private credit products proliferate, governance and transparency become part of the underwriting. The manager’s valuation policy, leverage disclosure and liquidity terms aren’t fine print – they are central to risk outcomes.

The bottom line for Australian portfolios

The key takeaway from webinar was that Asia is earlier in its private credit maturity curve and that can create a more attractive risk-reward set if investors are thoughtful about jurisdictional risk and manager selection.

For Australian advisers and wealth managers, the most actionable takeaways are:

• Treat Asia private credit as a multi-market strategy, not a single beta exposure.
• Understand the manager’s local capability and how much they understand their borrowers’ businesses.
• Pay attention to where returns are coming from: pricing, collateral, covenants and restructuring skill, not just headline yield.
• Recognise Australia’s growing role as a regional platform in corporate direct lending and consumer ABS innovation.

In a world where US private credit is normalising, with more dispersion and more defaults, diversification isn’t just about geography. It’s about choosing markets where the asset class is still being built, not merely refinanced.

Presented by the Financial Times Live and moderated by John Sedgwick, Managing Editor at Ignites Asia, Atiya Habib joined fellow panellists Kyle McCarthy of PIMCO and Deputy CIO and Head of Private Investments at SeaTown, Eddie Ong on the webinar “Asia’s Private Market Boom: Capital, Scale and Innovation”