PrimaryMarkets, a leading Platform for trading in private company securities, has sounded a note of caution for investors eyeing private credit opportunities, urging thorough assessment of credit quality and associated risk profiles as regulatory scrutiny intensifies.
The warning comes on the heels of the Australian Securities and Investments Commission’s (ASIC) recently announced review into private credit- a rapidly expanding segment within the broader private markets landscape.
Jamie Green, Executive Chairman of PrimaryMarkets, highlighted the growing complexity within the asset class, stating that “credit quality and risk level of private credit assets can vary significantly between lenders, and even between different products offered by the same lender.”
“Each lender has its own strategy or strategies, and this leads to meaningful differences in credit standards, security packages, loan terms, and risk appetites,” Green said. “Unfortunately, investors often operate with limited visibility. Confidentiality agreements may restrict access to detailed loan-level data, making meaningful comparisons between lenders or even within their product offerings difficult.”
Unlike publicly traded bonds, private credit investments lack transparency and market-based pricing, making it harder for investors to benchmark the risk/reward equation. “There are no readily available market prices or metrics,” Green said. “Instead, investors must depend on lender disclosures, qualitative commentary, and legal documentation to assess the underlying assets.”
This opacity is particularly challenging in an environment where investors are increasingly seeking alternative sources of yield. The illiquid nature of private credit adds another layer of complexity.
“Investors should understand that private credit is typically a long-term investment,” said Green. “It often involves capital lockups or limited liquidity options. Your investment horizon must align with that illiquidity.”
Green urged investors to undertake rigorous due diligence or engage financial advisers when considering private credit allocations.
“While private credit can offer attractive risk-adjusted returns, navigating this space demands professional oversight and a long-term perspective.”
ASIC’s review could mark a turning point for the industry. “It will be interesting to see how the regulator approaches oversight in this resurgent asset class, and how market participants adapt in response,” Green said.
“With private credit playing a larger role in portfolio construction, especially for yield-hungry investors, the call for better risk assessment and transparency is likely to resonate across the investment community.”.
