Riding the Global Shift into Private Credit: Global Trends and Australia’s Position
Back to Marketing InsightsIn the world of sophisticated investing, a significant transformation is underway. Private credit, also known as private debt, is rapidly transitioning from an alternative investment to a mainstream asset class. This shift is reshaping the lending landscape globally, with Australia poised to capitalize on the trend. But what’s driving this change, and more importantly, what does it mean for savvy investors and borrowers?
The Global Shift: Private Credit’s Rise to Prominence
The days when debt was solely the domain of banks are long gone. Across the globe, private credit is claiming an ever-larger portion of the lending market. The United States and United Kingdom have been at the forefront of this trend, with Australia now accelerating to catch up.

As of mid-2024, private credit funds in Australia were on track to manage an impressive $200 billion in capital (Weinman & Shapiro, 2024). This figure represents a seismic shift in the financial landscape. But what’s propelling this remarkable growth?
Multiple factors are at play. Regulatory changes have tightened constraints on traditional banks, making them more selective in their lending practices. Simultaneously, yield-hungry investors are turning to private credit for its attractive risk-adjusted returns. The combination of higher yields and the security of asset-backed loans presents a compelling proposition that’s drawing increased attention from institutional and sophisticated individual investors alike.
The US and UK Models: Diverse Approaches to Private Credit
To grasp the full picture of where private credit is headed, it’s instructive to examine the market leaders. In the US, Freddie Mac and Fannie Mae are household names, but their role in the private credit market requires clarification.
The Home Loan Giants
In the US, Freddie Mac and Fannie Mae are household names in the mortgage industry. These government-sponsored enterprises dominate the US residential mortgage market, representing a significant portion of the private credit landscape. However, it’s crucial to understand that this is just one segment of the private credit spectrum – and a relatively low-risk, low-return one at that. Firms like Bowery Capital typically don’t operate in this space, as the risk-return profile doesn’t align with our investors’ more conservative expectations.
The High-Risk End: Solicitor Loans
At the other end of the spectrum lie solicitor loans, a high-risk subset of private credit. These lenders often charge exorbitant interest rates and may even hope for borrower defaults to seize valuable collateral. While the promised returns can be tempting, investors need to be wary of the significantly higher risks associated with these loans. This sometimes can be seen as last resort lending.
Recent incidents in the Australian market serve as cautionary tales. The near-collapse of Public Hospitality Group, financed by high-interest loans from non-bank lenders, has exposed the risks inherent in some private credit arrangements (Weinman & Shapiro, 2024). In this case, the same assets were used as security for multiple loans, a practice that can significantly increase risk for investors.

Bowery Capital steers clear of this high-risk, potentially predatory lending model. Our focus is on providing value to both investors and borrowers, not exploiting financial distress.
The Middle Ground: Commercial Real Estate and Corporate Lending
Between these extremes, there’s a vast middle ground in private credit. This includes areas like commercial real estate lending and corporate debt, where firms like Bowery Capital operate. This segment offers a balanced approach, providing attractive returns without the excessive risks associated with predatory lending practices.
Australia’s Private Credit Landscape: Poised for Growth
Australia’s private credit market is at an exciting juncture. While growing rapidly, it still lags behind global counterparts, presenting a significant opportunity for expansion.

Currently, private credit accounts for approximately 16% of Australia’s $447 billion commercial real estate credit market (Harley, 2024). Compare this to the US figure of about 60%, and the growth potential becomes clear. Analysts project that by 2028, private debt could constitute 22.7% of total commercial real estate lending in Australia, reaching $146 billion.
However, this growth is not without its challenges. The Australian Financial Review’s investigation has revealed concerning practices in some corners of the private debt market. These include:
- Reluctance to write off badly performing loans.
- Poor communication with investors about troubled investments.
- Excessive fee structures that sometimes exceed investor returns.
- Inadequate due diligence leading to loans for companies that quickly become insolvent.
These issues underscore the importance of thorough due diligence and transparency in the private credit sector. As the market grows, it’s crucial for investors to distinguish between high-quality funds and those that may be “marking their own homework”.
Bowery Capital: Navigating the Private Credit Opportunity
In this evolving landscape, Bowery Capital has positioned itself strategically. We’re neither a traditional bank bound by rigid criteria, nor a high-risk lender chasing unsustainable returns. Instead, we occupy a carefully considered middle ground.
Our Focus: Registered First Mortgages
We specialize in registered first mortgages, leveraging our expertise to assess not just the collateral, but the overall investment proposition. This approach allows us to offer competitive rates to borrowers while providing attractive, risk-adjusted returns to our investors.
A Comprehensive Approach to Lending
Our lending model goes beyond simple asset valuation. We conduct thorough due diligence based on a comprehensive model that helps us navigate the complexities of the private credit market and capitalize on its opportunities while managing risk effectively.
Balancing Risk and Return
Our comprehensive approach allows us to strike a balance between attractive returns and responsible risk management. We’re not in the business of chasing the highest yields at any cost; instead, we focus on sustainable, long-term performance that benefits both our investors and our borrowers.
Riding the Private Credit Wave
As private credit continues its evolution from alternative to mainstream, Bowery is well-positioned to capitalise on the trend. We’re not just participating in the market’s growth – we’re helping to shape it, bringing a new level of sophistication and reliability to private credit in Australia.
The rise of private debt represents a fundamental shift in the provision and accessibility of capital. For investors, it offers a compelling avenue for portfolio diversification and yield enhancement. For borrowers, it provides access to capital that might otherwise be unavailable through traditional channels. And for Australia’s financial ecosystem, it represents an opportunity for increased robustness and diversity.
The private credit revolution is well underway. The question for informed investors is no longer whether to participate, but how to best position themselves within this dynamic and growing market. Talk to one of the team at Bowery for more information.