Ultra-wealthy investors are increasing allocations to private capital as market uncertainty persists. Private credit, in particular, is attracting capital with income resilience and structural tailwinds.
Where to invest going forward? Research into asset allocation moves within portfolios by Investment Trends identifies that ultra-high net worth investors (UHWNIs) are noticeably increasing their allocations to private credit.
Investment Trends notes UHNWIs were increasingly shifting their allocations within private markets from private equity towards private credit late last year – “and are expected to continue to do so this year”, says Eric Blewitt, CEO of Investment Trends.
Ultra and HNWIs’ favoured asset classes
Listed assets (domestic & global shares, indices, ETFs & REITS) | 53%
Property | 25%
Fixed income & cash | 10%
Private markets | ~10%
Average portfolios as at end 2025. Source: Investment Trends February 2026
Analysts and wealth managers explain the shift as investors, of many types, clearly becoming more cautious in today’s volatile geo-political environment. Several also note average returns of over 15 per cent as being appealling for investors. The widely used benchmark for private credit fund returns, the MSCI Global Private Credit Closed-End Fund Index, provided a total return for calendar year 2025 of 15.4 per cent.
As for the switch from private equity towards private credit, Nayef Perry, Managing Director and Head of Direct Credit at Hamilton Lane, adds elevated borrowing costs and longer hold periods have driven compression in expected returns for private equity, which could be a rationale for HNWI’s moving from private equity to private credit.
He says private credit continues to remain an attractive asset class that has outperformed its public benchmark every year for the past 24 years and that “2025 largely validated our ‘Golden Age of Private Credit’ thesis, with persistent supply-demand gaps, muted defaults and a continued higher-for-longer rate environment. Entering 2026, supportive macro conditions, resilient earnings and healthy equity cushions underpin continued stability in credit.”
Tanarra Managing Director, Peter Szekely, expects the local Australian private credit market will replicate the growth it experienced in 2025 – increasing by 9 per cent to $225 billion, driven by demand from family offices, high-net-worth (HNW) individuals, retail investors, super funds, commercial real estate borrowers and small-to-medium corporate borrowers alike.
“Sentiment towards private credit remains positive, with structural tailwinds continuing to support growth” and higher interest rates provide a conducive environment for private credit to outperform and deliver investors “reliable” income.
“This positions the Australian private credit market well to offer attractive returns versus overseas markets such as the US, where the US Federal Reserve cut interest rates in 2025 by 75 basis points and further cuts are possible in 2026.” Peter Szekely
“This highlights an important point,” Mr Szekely says, as “while rising interest rates and persistent inflation can negatively impact equity markets and erode the return on fixed-rate bonds, private credit investments typically benefit from rate rises as they feature floating-rate structures, with total returns rising on increases in the RBA cash rate. This floating-rate profile provides natural inflation protection, allowing investors to maintain benefit from higher yields as rates adjust upward in response to inflationary pressures.”
So, where are the best opportunities in private credit going forward? We asked some experts as to what they see.
Alper Kilic, Head of Alternative Credit at Ninety One, notes “with banks’ role in providing term lending reducing, primarily due to tighter regulation around capital requirements, the demand for alternative sources of credit continues to rise. On one hand, the requirement by banks to de-risk and recycle their balance sheets is creating demand for a further scaling of syndication channels; on the other, institutional investors are looking for scale and diversification in their private-market allocations – this is driving demand for asset managers to create diversified pools of assets.”
Emerging markets private credit
Emerging markets currently offer some of the better opportunities within the global private credit sector, as lenders can command attractive deal terms and strong levels of protection, suggests Mr Kilic.
They are also a less crowded market. “Lenders can command a pricing/return premium over developed market counterparts while also stipulating robust collateral protections and strong covenants,” he says. “Coupled with the fact that typical borrowers have defensive balance sheets and durable market positions, this is very much a ‘lender’s market’.”
Mr Kilic adds “unsecured lending is rare and borrowers have much lower leverage – typically 3-4x, compared to 6-7x in developed markets. Investors can achieve emerging market-level spreads on structures that look more like the US private credit market of 15 years ago.
“We see no signs of this changing, given the inherent complexity of the asset class and the fact that major market participants simply don’t have the necessary local expertise or origination networks – both of which take years to establish.”
Mr Kilic favours infrastructure assets, senior-secured lending to essential businesses and high-yielding credit opportunities.
This includes electrification, telecommunications, digital assets, transport, the transition to net zero, climate-resilient infrastructure – “these are all structural growth themes that are offering up an abundance of investment opportunities,” he says. For example, “Brazil already generates 88% of its electricity from renewable sources, and India has targeted 50% non-fossil capacity by 2030. This marks a structural shift in the centre of gravity for the energy transition and is translating into a broad range of potential deals for private market investors – both in the corporate and infrastructure sectors.”
As for specific markets, Mr Kilic notes, “we have expanded our track record beyond Africa in recent years to include Turkey, Singapore, Pakistan and Mexico. Last year, our footprint broadened further across emerging markets, with transactions completed in Brazil, the Philippines, India, Vietnam, Colombia, Serbia, Chile and Hong Kong.”
As for terms, he highlights “the persistent supply–demand imbalance in EM private credit has continued to support attractive average spreads and five-seven-year average tenors”.
Remain cautious
Investors continue to need to do their research. Private credit was a regular feature of news headlines in 2025, with some high-profile failures in the US sounding alarm bells. Transparency and protection are key aspect of private credit investors of all kinds need to be cognisant of.
Mr Szekely notes “poor private credit practices are one of ASIC’s stated enforcement priorities this year. Increased regulatory oversight is a positive step toward safeguarding investor confidence as the industry continues to mature and attract capital from new channels, including retail investors.
“In 2025, ASIC commissioned and released a report which identified material concerns around opaque fees and remuneration structures, weak valuation processes, concentrated allocation to real estate development, inconsistent reporting and related party transactions.”
Anant Kumar, Managing Director and Head of US Research at Benefit Street Partners, adds investors need to be aware of the increasing prevalence of higher Payment-in-Kind (PIK) features in some loan agreements.
“Data from S&P, Morgan Stanley Research indicates that over a third of direct lending deals with committed sizes surpassing US$750 million incorporate PIK features. Specifically, 44% of deals in the >$1 billion range feature PIK toggles, compared to a mere 3% in deals under $350 million.”
Mr Kumar, notes this “represents more than a cyclical adjustment: it marks a structural shift in how risk and competition are distributed across the private credit spectrum”.
Asset backed alternatives
Asset-backed finance, something that has been around for over a century, is also regaining favour in private credit due to being backed by underlying tangible assets.
“Asset-backed loans are typically senior secured and backed by tangible assets such as receivables, equipment, or real estate,” says Brendan Carroll, Senior Partner and Co-Founder at Victory Park Capital Advisors.
“Once a niche strategy within private credit, the asset class is getting broader recognition for its potential to deliver income, downside mitigation, and diversification in today’s volatile environment.”
Also, “as capital becomes more selective, many growth-stage companies are turning to private credit as an alternative to equity financing, echoing patterns from the Global Financial Crisis when credit markets filled the gap left by retreating equity investors. At the same time, commercial banks are pulling back from lending to small and mid-sized businesses, constrained by regulatory pressure and balance sheet risk. This has created a growing pool of creditworthy borrowers seeking non-bank financing.”
Mr Carroll adds “for institutional investors, asset backed finance (ABF) represents a distinct way to potentially enhance private credit portfolios that is less reliant on enterprise value and more closely tied to asset performance.
“ABF transactions typically feature loan durations of two to four years, compared with the six to 10 years common in direct lending. This shorter timeframe helps mitigate long-term macroeconomic risk and allows for more efficient capital recycling.
“These senior secured loans are backed by receivables, real estate, equipment, or other contractual cash flows. A range of tools enable lenders to seek to mitigate risk by underwriting defensively and actively managing collateral throughout the loan’s lifecycle.
“While many private credit strategies involve extended capital lockups, ABF can be offered through semi-liquid structures such as interval funds, evergreen vehicles and separately managed accounts. Investor-friendly options include levered and rated vehicles aiming to meet the needs of investors seeking regular income and greater accessibility without compromising structural protections,” adds Mr Carroll.
The move to increase private credit investments by ultra and HNWIs is in contrast to some major institutional investors, which have reduced their exposure to private markets, both private equity as well as private credit, according to the latest asset allocations reports from the Future Fund and Australian Super.
