Aussie private credit shows strength, lures offshore investors: Report

A new report reveals the strength of Australia's private credit sector compared to global markets, which is attracting substantial offshore capital, particularly from high-net-worth individuals, family offices and insurance companies.

This is according to the Australian Investment Council's (AIC) 2026 Australian private capital yearbook, finding that the country's economic outlook relating to tariffs, geopolitical tensions and demographic factors puts it in good stead among global private credit investors.

Private wealth investors are expected to deploy more capital to the sector, with "substantial potential" for large Australian private credit managers to attract Asian and European money. However, this is contingent on better promoting Australia's diversified economy internationally.

Preqin estimates there is $5.4 billion in closed-ended private credit funds, and a further $40 billion in net asset value in open-ended funds.

"The influx has been both beneficial and challenging - while validating the market's appeal, it has intensified the need for deployment discipline as managers compete to put capital to work," the report read.

"The sector anticipates accelerated growth driven by diversification demands from investors seeking alternative return sources."

Conversely, Australian investors are investing "significant capital" to global private credit funds.

Several issues in the local private credit market, however, play at large. This includes the need for deployment discipline and better enhanced transparency.

"A critical debate centres on appropriate fund structures for private credit. Do private credit's shorter-duration assets make it better suited to open-ended funds than traditional private equity? If so, private credit managers need to maintain rigorous discipline in managing capital flows and provide clear communication about redemption opportunities," the report said.

"There is broad emphasis on the importance of investor education around fund mechanics and the fine print governing capital access."

Overall, the Australian private capital sector reported assets under management (AUM) at record levels of $161 billion.

Private equity and venture capital together account for $72 billion. Assets across real estate, infrastructure and natural resources came to $83 billion.

Australian private capital funds also outperformed globally, delivering a return of 12.7% per annum, including both realised and unrealised returns.

Private equity saw $13.6 billion in deals across 147 transactions in 2025, with technology accounting for about one third.

AIC chief executive Navleen Prasad said the yearbook shows private capital is playing a bigger role in funding Australia's future, but that regulatory friction and uncompetitive policy settings risk pushing investment offshore.

"Other countries are falling over backwards to court international capital, including our world-class superannuation pool. Presenting a Team Australia front is smart, but where are the much-needed reciprocal programs selling Australian opportunities to international investors?" he said.

In recent years, the study found family offices became more active private capital investors, though in volume terms, institutional investors, including superannuation funds, still dominate.

Family offices' demand for venture capital is more pronounced. Almost half of all venture capital investors studied between 2021 and 2025 were active Australia-based family offices.