Australia's corporate regulator has issued a stark warning about the dangers of private credit, cautioning that virtually every working Australian with superannuation could be exposed to risks stemming from a rapidly growing but opaque global lending market that is showing serious signs of stress.
The Australian Securities and Investments Commission (ASIC) is urging Australians to understand what private credit is and how their retirement savings may be tied to it — at a time when global central banks are scrambling to get a grip on a sector that operates largely outside traditional banking oversight.
What is private credit and why is ASIC alarmed?
Private credit refers to lending that takes place outside the conventional banking system. It expanded sharply earlier this decade when software companies became major recipients of non-bank funding, and the flow of capital has since shifted heavily towards artificial intelligence firms. The sector has grown rapidly, but ASIC's November 2025 surveillance report found there are "some areas where improvement is needed — and in some cases, materially so."
ASIC commissioner Simone Constant highlighted particular concerns around the Australian property market, warning that if property is overvalued and problematic lending practices emerge at scale, the consequences could be severe.
"If the Australian property is overvalued, and we see those practices emerging and it happens at scale, you get gaps," Constant said. "And when you get those gaps, you get problems with liquidity, you get lagging in data, you get the risk of default. And of course, investors putting their money into things that don't stack up."
Global warning signs are already flashing
The stress in private credit markets is not theoretical — there are already concrete examples of lenders buckling under the pressure. US private credit firm Blue Owl was forced to limit investor withdrawals this year after its funds bled value from souring software investments. The firm's shares have collapsed by 40 per cent this year as investors grew increasingly anxious about its exposure to struggling software companies, with elevated redemption requests persisting into the June quarter.
The collapses have not been limited to one geography. US auto lender Tricolor Holdings and UK mortgage lender Market Financial Solutions have both already failed, adding to concerns that the sector's troubles are broadening.
Verdad Adviser managing partner Dan Rasmussen has been among the loudest voices warning of systemic risk. He has flagged the danger of a negative feedback loop in which software companies default on their debts, triggering a wider panic across private credit markets. "We're going to see more and more pain," he warned.
Central banks take notice as scrutiny intensifies
The turmoil has drawn the attention of central banks around the world. The Bank of England launched a system-wide exploratory scenario exercise in December to better understand the broader risks in private markets, with results expected to be published in early 2027. Bank of England governor Andrew Bailey acknowledged in May that strains were visible, pointing to a sharp rise in requests for outflows from private market funds.
Documents obtained under Freedom of Information laws reveal that the Reserve Bank of Australia has also been making its own inquiries into the financial and economic risks the private credit sector poses domestically.
What this means for Australian super savers
The concern for ordinary Australians is that superannuation funds — which hold the retirement savings of millions of workers — have increasing exposure to private credit as fund managers seek higher returns in a low-yield environment. If private credit markets experience a significant shock, either from a US-led implosion or domestic property-related stress, the ripple effects could reach everyday Australians through their super balances.
ASIC's message is clear: with every working Australian effectively a stakeholder through their compulsory superannuation contributions, understanding this corner of the financial system is no longer optional. The regulator is pushing for greater transparency and urging Australians to ask questions about how their retirement savings are invested.
