Andrew Baume | March 16 , 2026
Private Credit remains a strong market segment in terms of inflows going into mid-March 2026 and we continue to see plenty of good opportunities in the pipeline. In the year ahead, we expect private credit to build on its gains as a mainstream financing solution in response to both greater local demand for bespoke financing and for investors looking for yield and diversification.
However, in the investment landscape, geopolitical developments often override idiosyncratic market factors, and the escalating conflict in the Middle East has the potential to significantly influence near-term sentiment. Counterbalancing this risk is the immense liquidity currently being generated by retirement savings programs, such as Australia’s Superannuation Guarantee. While “risk-off” selling can create lower entry prices, it is currently too early to determine if such moves represent a definitive buying opportunity.
Typically, volatility is the enemy of credit returns (far more than actual defaults), however conditions of copious liquidity tend to limit the widening of credit spreads that would typically accompany these events. Caution must be tempered with acceptance that the historical norms for credit do not necessarily apply in our current environment of extremely low levels of default and strong inflows to the segment.
Private credit is by its nature less liquid than traded markets, which is a feature rather than a negative. In fact, credit markets have historically overcompensated for default risk and seeking liquidity during times of volatility usually involves realising valuation losses when borrowers go on to fulfil their obligations. The illiquidity premium inherent in the pricing of this debt is recognition that there is less flexibility and yet this has been the backbone of banking profits for over 500 years. Private debt investors are usually better served by being patient and in Australia default frequency is systemically lower than in the US, for example.
There is also no doubt banking regulation has made certain types of lending less attractive in terms of bank capital charges and private debt providers have stepped into the breach. This segment is inherently more prone to credit events but also delivers significantly higher returns and these excess returns paid by all borrowers are available to offset the relatively fewer borrowers who do default. Further, private credit lenders are repaid before equity holders receive any return of capital or dividends. Australia’s bankruptcy laws are also widely considered to be more creditor friendly than US Chapter 11 and other bankruptcy regulations.
As a result, one of the key factors an investor should consider is not the transparency of any given fund but the capacity of the manager to perform. It is a competent manager who is the key to optimising returns in a specialised area of investing. Credit is a technically complex discipline and although transparency is comforting, it can lead to reactions that tend to lock in underperformance rather than enhance medium-term returns.
Strong unemployment data in the middle of February vindicated the RBA rate hike decision earlier in the month, where the cash rate was moved from 3.60% to 3.85%. More concerning still there was an unexpected increase in monthly inflation where CPI (both Headline and Trimmed Mean – The RBA’s preferred measure) were troublingly high.
There is no consensus on another hike at the March meeting, but debate is largely around when there will be a second hike and whether there could potentially be a third. Spikes in energy pricing will affect not only Australian but worldwide inflation and all central banks will be monitoring very closely.
Availability of credit is a strong barometer of credit performance as lenders observing stress in their portfolios become risk adverse well before collated data becomes available. The growth of credit availability in Australia is continuing to reflect that, on a consolidated basis, there has been little stress.
This comfortable position may change as rate hikes run through the system, but lenders report a very competitive market for consumer, corporate and SME lending. While loan activity was quieter in the short month of February, a strong pipeline exists for March deployment.
Syndicated Loan markets are testing longer maturities and relatively flat credit risk curves. Whilst portfolio managers at iPartners are in the unique position of being able to invest in these markets opportunistically, we are also focused on generating deal flow through our origination process.
The iPartners Credit Investment Fund celebrated its six-year anniversary in February, delivering a steady 0.66% monthly return (9.00% p.a. annualised). Since its March 2020 inception, the Fund has achieved a 9.54% p.a. net return, growing an initial $100,000 investment to $172,528 as at end of February 2026.
Our portfolio managers pivoted toward a more conservative stance in February, increasing weightings in senior secured real estate investments. While corporate loan activity was quiet during the month, a robust transaction pipeline is expected for March deployment. We are confident the Credit Investment Fund portfolio of 60 positions and over 90,000 obligors will continue to provide a stable trajectory for our investors.
