Source: SMSF Adviser
Author: Alan Greenstein
Date: 28 March 2026
Australia’s SMSF sector is growing at a record pace. With 14,500 SMSFs originated in the September quarter, the highest establishment rate in recorded history, SMSFs now control more than $1 trillion of Australia’s super sector.
Amid strong growth in SMSF funds under management (FUM), and against a backdrop of escalating market volatility and geopolitical tensions, demand for income, downside protection, and diversification is intensifying. Yet, income generation and portfolio construction have become increasingly complex, even for the most experienced investors.
Enter Australian real estate private credit. Gaining a reputation for delivering steady, risk-adjusted returns that are uncorrelated to public markets, Zagga saw SMSF allocations grow by almost 25 percent year-on-year in FY25, while FUM among IFA-advised SMSFs increased by a staggering 130 percent over the same period.
Valued at $224 billion, and growing nine percent year-on-year, Australia’s private credit market is now on track to be larger than our domestic public bond market. Real estate private credit, in particular, is forecast to reach $90 billion by 20291 and is expected to account for approximately 30 percent of Australia’s commercial real estate debt market in the near term.
In the face of uncertainty, Australian real estate private credit has become a stabilising force for many investment portfolios – delivering consistent income, enhanced diversification, and shelter from public market noise and sentiment-driven volatility. It is no longer a niche but a strategic allocation for sophisticated investors and a core part of well-diversified portfolios.
Predictability amidst volatility
Real estate private credit offers predictability amidst a world of persistent uncertainty.
This predictability has become a noteworthy benefit, particularly as traditional defensive, fixed income assets, like bonds, become increasingly correlated with equities, dampening their ability to act as a hedge in portfolios.
In contrast, real estate private credit sits outside of public market cycles, with returns driven by underlying loan book performance rather than short-term market movements. Investors also hold security over physical property assets, can receive contractual monthly interest payments, and can invest across the capital stack, either directly or through a fund.
The floating rate nature of private credit means returns move with the prevailing cash rate, unlike traditional fixed income securities, which are exposed to mark-to-market volatility as interest rates shift. While fixed-rate bonds may see capital value erosion when rates rise, private credit maintains its income margin – helping smooth returns across cycles and offering a defensive buffer in uncertain markets.
For SMSF investors, this stable and predictable income is in demand. Trustees need reliable income streams to meet minimum pension drawdowns, manage sequencing risk, and smooth portfolio volatility as they transition into or remain in retirement. The ability to generate contractual, floating-rate monthly income – backed by real property assets – is particularly valuable in an environment where share dividends are no longer reliable, yields are compressed on brick-and-mortar property investments, and the hybrid market has all-but-completely disappeared.
Not all credit created equal
In a structurally different investment environment, many SMSF investors are realising the traditional 60/40 portfolio is no longer fit-for-purpose. There is a shift towards a more modern framework: 25/25/25/25 — an equal allocation across equities, fixed income, alternatives, and private markets.
Incorporating alternative, uncorrelated assets can build more resilient portfolios, without sacrificing returns, income, or exposure to proven asset classes, like real estate.
However, not every private credit opportunity is created equal. Investor due diligence is vital, and in this environment, investors must prioritise manager selection and experience across credit cycles.
A cycle-tested manager understands recovery processes, maintains strong counterparty relationships, and can act decisively to protect investor capital. This is where governance and discipline translate directly into returns.
For SMSF investors, the focus must be on managers who are not only delivering returns today, but who have demonstrated ability to navigate uncertainty, operate with transparency, and act with integrity when conditions tighten.
Realising return potential
With SMSF origination at record levels, and the investment climate becoming increasingly challenging, we expect demand for reliable, risk-adjusted income and diversified returns to continue driving growth for this burgeoning asset class.
As market headwinds intensify, real estate private credit can bolster portfolio resilience, ensuring SMSF investors hold steady, keep calm, and carry on.
1. Alvarez & Marsal, Australian Private Debt Market Review, November 2025
