Why not all private credit funds are the same

Understand the differences to unlock long term investment growth.

Private credit is rapidly gaining prominence in Australia, attracting investors with its lower volatility, steady income potential, and built-in capital protection measures.

While private credit is still a relatively new asset class in Australia, it has been well-established in the US and Europe for decades.

One of the key drivers behind the rise of private credit in Australia is growing bank regulatory pressure, combined with slow and rigid lending processes, making it harder for many businesses to secure traditional financing that meets their needs.

Private credit has emerged to fill the gap, offering faster approvals, more flexible terms, and a borrower-centric approach that better aligns with the demands of today’s business landscape.

For investors, this presents an attractive opportunity. But it’s important to recognise that not all private credit funds are created equal. Understanding the differences between them is key to choosing a fund that aligns with your long-term investment goals.

In this article, we’ll break down what private credit is, why it’s gaining traction in Australia, and what to consider when choosing the right private credit fund.

What is private credit?

Private credit (also known as private debt) refers to loans provided by non-bank lenders using capital raised from investors. These funds are lent to businesses and individuals across various industries.

At Capspace, for example, we specialise in lending to Australian small, medium, and emerging businesses (SMEs) that require funding for expansion, acquisitions, or working capital, with our lending products secured by real property and business assets.

Why private credit is growing in Australia.

There’s a growing demand for private credit in Australia, and it comes down to one key issue: banks aren’t lending the way they used to.

Increasingly complex banking regulations and lengthy approval processes have created a gap in the traditional lending market. Many businesses are held back by the rigid lending criteria and red tape, meaning they are missing out on growth and expansion opportunities due to bureaucracy and delays.

While borrowers are often thought of as struggling businesses or individuals, the reality is that high-quality, multi-million-dollar companies are also impacted. These include manufacturers expanding globally, successful restaurateurs scaling their operations, and disability accommodation providers growing nationally (see some of the borrower clients we have assisted.) They require quick, flexible, and responsive funding to jump on opportunities as soon as they arise - something private credit funds are well-equipped to offer.

Not all private credit funds are the same.

While private credit is filling an important gap in the market, it’s essential to understand that not all funds operate in the same way.

For investors, private credit offers the potential for consistent returns and portfolio diversification. But it’s not a one-size-fits-all investment. Before committing to a fund, it’s important to do your due diligence and assess its structure, risk profile, and investment strategy.

Private credit can be a powerful tool for building wealth, but choosing the right fund is key. The right investment provides not only strong, risk-adjusted returns but also supports businesses that drive innovation and economic growth.

What to consider when choosing a private credit fund.

Here are some key factors to evaluate before investing:

The quality of borrowers. Is the fund lending to well-established businesses with strong financials?
Risk management. What safeguards are in place to protect investor capital?
Track record. Does the fund have a history of strong performance and responsible lending?
Management expertise. Does the leadership team have a deep understanding of credit structuring, risk management, and borrower profiles? Have they successfully navigated complex financial landscapes before?
Security profile. Are the loans backed by high-quality, easily recoverable assets? How conservative are the fund’s lending practices?
Returns. Has the fund consistently delivered strong, stable returns? How does its performance compare to similar funds?
Ethical and impactful initiatives. Does the fund align with your values? Investors increasingly seek funds that not only generate financial returns but also support meaningful causes and long-term sustainability. See Capspace's community initiatives.

The future of private credit in Australia

Private credit is reshaping the lending landscape in Australia, offering new opportunities for both borrowers and investors. As the market grows, selecting the right fund is more important than ever.

At Capspace, we focus on offering lending solutions to quality, established Australian SMEs and implementing rigorous risk management to safeguard investor capital.

If you’re considering private credit as part of your investment strategy, understanding the nuances of different funds will help you make the right choice for your long-term wealth goals.

Why investors choose Capspace.

At Capspace, we’ve built a reputation as a leader in the private debt space, specialising in short-term lending solutions to growing Australian SMEs. Our focus is on supporting businesses with the capital they need to grow, while delivering strong, risk-adjusted returns for our investors.

Here’s what sets us apart:

Experienced leadership and expertise: Our team is led by four renowned industry professionals with over 100 years of collective experience in global finance, law, and property, and a proven track record in private debt.
Consistent and reliable returns. Since inception, we’ve delivered stable returns through a disciplined approach to risk management.
Transparency: We believe in open communication, giving investors clear visibility into where their money is invested. Capspace provides regular performance updates, including independent third-party audits of the property assets used as loan security.
Regular income. Our private debt fund offers consistent monthly interest payments, providing predictable cash flow.
Enhanced liquidity. Our diversified fund structure, spread across multiple projects and industries, means investor capital isn't locked into a single asset. This allows for flexibility and access to funds when needed.
Personalised service. No matter the level of investment, we take the time to understand your goals. Our approach is grounded in clear communication and long-term relationships tailored to your individual needs.
Alignment with investor values. We prioritise responsible lending and align our strategies with the principles and objectives of our clients.
Innovation and agility. We adapt to market conditions, identifying high-quality opportunities that deliver value to investors.

*Past performance is not indicative of future results. Investors should consider their own objectives and risk tolerance before investing.

To learn more about Capspace’s approach to private debt, get in touch with our investment team.

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Disclaimer: This document has been prepared by Capspace Funds Management Pty Ltd (ACN 673 343 023) (AFSL 555758) (‘Capspace, ‘we’ or ‘us’), and is for general information purposes only and is not an offer or solicitation for the purchase or sale of any financial product or service. The document has been prepared for investors who qualify as wholesale clients under sections 761G of the Corporations Act 2001 (Cth) or to any other person who is not required to be given a regulated disclosure document under the Corporations Act. The material is not intended to provide you with financial or tax advice and does not take into account your objectives, financial situation or needs.

Although we believe the material is correct, no warranty of accuracy, reliability or completeness is given, except for liability under statute which cannot be excluded.

Investments involve risk. Prior to considering an investment you must obtain the Fund Information Memorandum which will outline the risks involved and other relevant information. Please note that past performance may not be indicative of future performance and that no guarantee of performance, the return of capital or a particular rate of return is given.

This material is proprietary to Capspace. The recipient of this material agrees not to reproduce or distribute this material in whole or in part and not to disclose any of its contents to any other person.