Insights from Zagga’s panel discussion 

Negative headlines have affected investor confidence, but the level of market noise should not be mistaken for a broad deterioration across private credit. Current challenges are real and should not be minimised; however, the evidence presented by the panel suggests that underlying credit quality and Australian market fundamentals remain comparatively resilient. 

“We’ve been long-term investors in private credit for 10 years now and I can’t recall a time where a particular sector has had so much bad news out there. But the reality is, if you look under the bonnet…the actual underlying credit is still in very good shape.” 
Simon Duckett (09.44) 

“Australia…is our own unique market, but it’s also a market that is underpinned by strong fundamentals.” 
Daniel Jones (32:20) 

“It’s a very real problem that needs very real solutions, but you only find the solutions when you’ve got the problem.”
Benni Aroni (01:08:00) 

Private credit is a broad and diverse market, not a single asset class with a uniform risk profile. Individual credit events must be considered in the context of the borrower, underlying asset, security, structure, portfolio concentration and manager responsible for originating and managing the loan.

“One of the misconceptions…is that private credit is a single asset class. I think it’s a very broad asset class that has multiple sectors and multiple segments within it. So to say that private credit is singular, I think, is a massive misconception.”
Daniel Jones (09:11)

“There are subsections of real estate, of borrowers. There’s performing, there’s not performing, there’s distress, there’s special situations.”
Tom Cranfield (01:09:42)

“Do I think that [the current situation] creates systemic risk or that the entire marketplace is clouded in the way that there’s no good borrowers…or that the market won’t absorb the real estate…? No, I disagree.”
Tom Cranfield (01:11:33)

Periods of stress expose differences between managers. Governance, alignment, through-cycle experience and the discipline to reject transactions that fall outside a manager’s risk settings become more important when conditions are difficult. The ability to originate volume is not, by itself, evidence of manager quality. 

“Governance is the first thing on my checklist. Every time I assess a non-bank or a manager, governance is the first thing.” 
Daniel Jones (38:30)   

“A manager is assessed on what they are willing to walk away from, not the deals that they can originate.” 
Daniel Jones (38:30) 

“Manager alignment is key for us. There has to be manager alignment.” 
Daniel Jones (17:47) 

“It comes back to manager selection being just so important… Like every sector, there’s always really good managers who’ve got really good experience that we feel really comfortable with.” 
Simon Duckett (1:14:23) 

“If you are disciplined in your assessment and disciplined in your work, then you can continue to perform on behalf of your investors.” 
Tom Cranfield (1:11:33) 

Private credit should not be treated as a cash substitute. Some of the current investor concern reflects a mismatch between the illiquid or semi-liquid nature of the underlying assets and the liquidity investors expected to receive.  

“Illiquidity is a feature, not a flaw” – illiquidity must be understood, appropriately matched to the investor’s time horizon and managed in a manner that protects remaining investors. 

Where appropriately disclosed and managed, redemption restrictions can protect long-term investors by avoiding the forced sale of higher-quality assets at an unfavourable time. 

“Unless you’ve got the ability to stay in the asset class for 12 months, you should be in fixed income.” 
Simon Duckett (33:23)  

“If you’re a long-term investor, we want funds that will gate. That protects your interests, and we don’t want the best, most liquid assets sold just to meet redemptions.” 
Simon Duckett (33:23) 

“Unfortunately, a lot of people who’ve invested haven’t understood that they’ve invested in a product that is illiquid to semi-liquid. I think a lot of the fear from investors is that they didn’t truly understand what they invested in.” 
Tom Cranfield (1:11:33) 

“Providing you can handle the potential illiquidity…we still see private credit as a very, very attractive place to invest from a risk-adjusted perspective.” 
Simon Duckett (23:25) 

Current dislocation is producing a divergence in investor behaviour. While negative headlines are prompting caution among some individual investors, the panel observed that institutional and professional capital continues to assess the sector on its fundamentals, with some investors maintaining or increasing exposure where governance, diversification and manager quality are robust. 

“We are seeing money that looks at fundamentals, that is objective, that is rational, that’s clear-thinking and ignoring noise, only increase their exposure…where they’re seeing noise drive individuals out of markets.” 
Tom Cranfield (49:25)  

“These guys don’t have price risk. They’re not just investing because of the return. And I think they see this as an opportunity rather than a threat.” 
Simon Duckett (49:57) 

“Private credit has proven that it is an asset class that’s here to stay, and I think institutions will continue to increase their allocation.” 
Daniel Jones (52:54)