At its simplest, private credit is lending that happens outside the banks. Our guest panelists explained that it falls into three broad areas: loans to companies, finance secured against assets such as equipment or vehicle fleets, and loans secured against real estate, which is where both managers specialise. As Travis noted in his opening remarks, the Australian market has grown from around $35 billion a decade ago to roughly $224 billion today, expanding at about 20% a year and comfortably outpacing traditional bank lending.

Much of that growth has come as the banks stepped back from commercial property. Because a bank must hold considerably more capital against a commercial loan than against a home loan, residential mortgages have become the more rewarding business, and private lenders have moved into the space left behind. Add a chronic housing shortage, attractive investor returns and Australians' long-standing comfort with property as an asset, and the sector's rise is easy to understand.

Private lenders tend to offer more flexible terms and faster decisions, and borrowers always know where their application stands, which is why so many are comfortable paying a few percentage points above a bank rate for the relationship.

For investors, the appeal lies in the income, though both panelists were careful to remind the room that yield is always payment for risk. A conservative first-mortgage book tends to return somewhere in the order of 8–10% a year, and when a headline return reaches double digits, it is usually a sign of higher leverage or more complex structures sitting behind the number.

The recent collapse of Sydney Developer Bathla and closer regulatory attention have put the sector firmly in the spotlight in recent weeks, and the panel welcomed that scrutiny, given how quickly the market has grown. Both managers have reviewed their businesses against ASIC's published principles for private credit, which set out clear expectations around transparency, governance, conflicts of interest and valuations.

Both managers made an important distinction between a borrower facing difficulty and an investor losing money, noting that working through a problem loan is a normal, if unwelcome, part of lending. Because a first mortgage places the lender first in line to be repaid when a property is sold, well-run managers can resolve these situations methodically rather than rushing to sell, and both panelists expect that measured approach to continue across the sector.

When it comes to choosing a manager, both panelists look for the same qualities: experience across several market cycles, a track record that has held up through downturns such as the GFC and COVID, and the financial strength to absorb problems when they arise. Above all, they spoke about character, because how a manager behaves and communicates when a loan runs into trouble says far more than how it performs when everything is going well.

They also shared what disciplined lending looks like in practice. Both favour land subdivisions and lower-rise projects that are easier to value and to exit if circumstances change, while steering clear of high-rise apartments and large hotel developments, and both inspect every site in person and stress-test each developer's numbers rather than taking them at face value.

Our own approach at Hewison is built on the same thinking. We invest only in first mortgages, cap loan-to-value ratios at 67% with an average closer to 60%, and rely on independent valuations for every loan, while our contributory structure means you always know exactly which loan your money sits within.

 Our hosts closed the morning with a reflection worth carrying forward: no investment is entirely free of risk, cash included, and history shows that stepping to the sidelines in uncertain times has often cost investors more than staying the course. Understood well and held as part of a diversified portfolio, private credit can play a valuable role, and if you'd like to explore how it might fit within your own plans, your adviser would be glad to talk it through with you.  Our hosts closed the morning with a reflection worth carrying forward: no investment is entirely free of risk, cash included, and history shows that stepping to the sidelines in uncertain times has often cost investors more than staying the course. Understood well and held as part of a diversified portfolio, private credit can play a valuable role, and if you'd like to explore how it might fit within your own plans, your adviser would be glad to talk it through with you.