What is private credit?
Private credit refers to loans and other forms of debt financing provided by non-bank lenders rather than traditional banks. In Australia, the private credit market has grown to over $30 billion and continues to expand at 15 to 20 per cent per year as institutional and wholesale capital rotates from traditional fixed income into property-backed lending.
Private credit encompasses a range of lending activities, including property-backed mortgage lending, construction finance, bridging loans, and development finance. Funds that invest in private credit are commonly structured as managed investment schemes and are typically available to wholesale investors only.
Why is private credit growing in Australia?
Several structural factors have driven the growth of private credit in Australia. Stricter capital adequacy requirements imposed on banks by APRA have led to a significant reduction in bank appetite for property development and construction lending. This has created a sustained gap in the market that non-bank lenders have moved to fill.
At the same time, wholesale investors have been drawn to private credit because of its potential to provide regular income through monthly distributions, its low correlation with traditional equity and bond markets, and the tangible security of registered mortgages over Australian real property. In a market environment characterised by volatility in listed equities and compressed returns on government bonds, property-backed private credit offers a compelling alternative for income-focused investors.
How does private credit compare to traditional fixed income?
Private credit differs from traditional fixed income investments such as government bonds and corporate bonds in several important ways. Private credit typically offers a yield premium over comparable fixed income investments, reflecting the illiquidity and credit risk of the underlying loans. Unlike unsecured corporate bonds, property-backed private credit is secured by registered mortgages over real property, providing a tangible asset underpinning the investment.
Private credit also has a low correlation with listed equity and bond markets, which can provide diversification benefits within a broader investment portfolio. However, private credit investments are generally less liquid than listed bonds and may have notice periods for withdrawals.
How Granor Capital invests in private credit
Granor Capital deploys investor capital into property-backed loans secured by Australian real estate. Our approach is built on disciplined credit assessment, conservative loan-to-value ratios of up to 80 per cent, independent valuations on all security properties prepared by certified practising valuers, and active monitoring throughout the term of each loan.
We lend on residential and commercial property construction and development across Australia’s major capital cities and regional centres, with loan sizes ranging from $200,000 to $20,000,000 and terms typically between 12 and 24 months.
Two pathways into property-backed private credit
Granor Capital offers two fund structures for wholesale investors seeking exposure to private credit. The Granor Lending Fund is a pooled mortgage fund that provides passive diversification across a portfolio of property-backed loans, targeting approximately 8 per cent per annum in monthly distributions. The Granor Lending Fund No. 2 is a contributory lending fund that allows investors to select individual loan opportunities and build their own portfolio of property-backed investments.
Is private credit a good investment in Australia?
Private credit can be an appropriate investment for wholesale investors seeking regular income, portfolio diversification, and exposure to property-backed security. However, like all investments, private credit carries risk including borrower default, changes in property values, and liquidity constraints. The suitability of private credit depends on each investor’s individual objectives, financial situation, and risk tolerance. Investors should read the fund’s Information Memorandum carefully and seek independent financial advice.
What returns can I expect from private credit?
Returns from private credit investments vary depending on the fund’s strategy, the risk profile of the underlying loans, and market conditions. Granor Capital’s Granor Lending Fund targets approximately 8 per cent per annum, paid monthly. Target returns are not guaranteed, and past performance is not a reliable indicator of future performance.
How is private credit different from a mortgage fund?
Private credit is the broader asset class, encompassing all forms of non-bank lending. A mortgage fund is a specific type of private credit investment that focuses on loans secured by registered mortgages over real property. Granor Capital’s funds are property-backed mortgage funds that sit within the broader private credit category.
What are the risks of investing in private credit?
Key risks include borrower default, property market decline, liquidity constraints, concentration risk, and manager risk. Responsible fund managers like Granor Capital mitigate these risks through disciplined credit assessment, conservative loan-to-value ratios, independent valuations, portfolio diversification, and active loan monitoring. However, risk cannot be eliminated entirely, and investors should be prepared for the possibility of loss.
Explore our funds: Investment overview | Wholesale mortgage funds | Granor Lending Fund
Related: Private credit guide | How monthly distributions work | Wholesale investor eligibility
This page is for general information only and does not constitute financial advice. Investment opportunities are available to wholesale clients only as defined in the Corporations Act 2001 (Cth).