AusBiz: Why Stanley sees opportunity in Australian Private Credit

Key Points:

• US private credit growth driven by post‑GFC regulation and bank retreat from high‑EBITDA lending
• Australian private credit is concentrated in real estate with strong tangible collateral
• Rising rates enhance private credit returns relative to traditional equity for some investors

Stanley Hsieh sets out why private credit moves from niche allocation to front-page risk, yet still offers opportunity, in his view, for Australian investors. Hsieh contrasts the US market, where post‑GFC regulation and Basel III push banks out of high‑leverage, high‑EBITDA corporate lending and open the door to private credit funds. Many of these US loans, Hsieh says, sit behind private equity‑owned software businesses now facing pressure as artificial intelligence undercuts their competitive edge, triggering investor redemption stress.

Hsieh argues that Australia’s private credit landscape is fundamentally different, with capital largely directed toward real estate rather than cash-flow-only software models. Loans are typically secured against tangible assets such as land and development sites, with loan amounts well below underlying collateral values. In Hsieh’s view, this tilts the risk/return profile towards “value investing” in credit, rather than the more aggressive US approach.

In a higher-interest-rate environment, Hsieh notes that private credit coupons reset upward with base rates, allowing investors to target equity‑like returns of around 10% while remaining within a debt structure and stronger security. On the Federal Budget, Hsieh highlights potential headwinds from changes to capital gains taxes for larger apartment pre‑sales, but expects policy focus and infrastructure spending to support new housing supply overall.