Source: The Golden Times
Author: Nicholas Way
Date: 22 October 2025
With alternative investments having growing appeal, the need for self-funded retirees and their advisers to do their due diligence has never been more important – as a recent ASIC report highlighted.
The demise of the $40 billion hybrid market by 2032 will simply fuel the growing appeal of private credit – especially for self-funded retirees.
That’s the considered view of Tom Cranfield (pictured), executive director, risk & execution, at Zagga, an alternative real estate investment manager, who says this capital needs to find a home and property, alternatives and fixed income are the obvious choices.
In this scenario, he says the appeal of private credit can only be enhanced because it’s now an established asset class.
“There’s no argument that the private credit market has become more mature, more sophisticated, and that self-funded retirees, in their hunt for yield, are increasingly comfortable using this investment vehicle,” he says.
It’s not just self-managed super fund (SMSF) trustees driving this growth. In Cranfield’s opinion, there’s a broader set of independent financial advisers (IFAs) who are familiar with the asset and confident recommending it to clients. To make his point, he notes that Zagga’s funds under management via IFA-advised SMSFs grew 130 per cent in the 2025 financial year compared with 2024.
“SMSFs are paying advisers to conduct the necessary due diligence on private credit funds. And in my experience, it’s a very thorough process; they do their homework. I think everyone is very alive to the fact of just how important due diligence is before an investment decision is made.
“It’s not only advisers, with some individual investors also extremely diligent. I think some of them want to know the colour of my underwear. Others have asked five questions and have been happy to invest – it’s a broad spectrum.”
That advisers and investors are still treading warily is hardly surprising, their caution undoubtedly reinforced by a recent ASIC report that found while private credit was a bonus for the economy, its standards needed to improve. It identified four areas, in particular, that needed addressing:
- Conflicts of interest that are prevalent across fee structures, valuations, related party transactions and loan structuring.
- Fees and remuneration structures varied widely and are often opaque and not quantified.
- Inconsistent portfolio transparency and valuations that could have implications for reported performance and investor risk assessments.
- Key terms are inconsistently defined, creating investor confusion.
So, while private credit is mainstream, many advisers and investors rightfully remain cautious.
For Cranfield, it means establishing a manager’s track record, investment exposure and borrower creditworthiness, as well as understanding how they assess and manage default risk, is critical.
“Our due diligence around our counter parties, who sits on the other side of the transactions for that investor money, is extremely important. We’ve tried to attract blue-chip assets and developers to manage that risk, so investors get a safe and stable return.
“With our Feeder Fund, we have a target rate of the official cash rate plus 500 basis points, and it has either hit or exceeded that target every month since its inception in 2018. That’s been achieved through different cycles, whether they be interest rates, inflation, supply chain disruptions, real estate asset valuations or cap rates.
He adds that it’s also important for investors to understand that private credit strategies and investments vary between managers, and that knowing where your investment sits in the capital stack is vital.
ASIC’s reservations notwithstanding, it’s difficult to contest Cranfield’s assessment that private credit growth will continue apace, noting that it still lags the US, UK and Western Europe. In the US, for example, private credit represents more than 50 per cent of commercial real estate financing. By contrast, it’s less than 20 per cent in Australia, although that number is expected to grow to 30 per cent by the end of the decade.
“We’ve reached a stage where the market depth across advisers, professional investors and institutional capital is making everyone sit up and take notice. If you wind back five years, it was an emerging market. Now it’s mainstream,” he says.
For SMSFs, in particular, it offers consistent, stable income generation, Cranfield says.
“I believe that for SMSF investors, having stable, recurring income is something that they want to be part of their portfolio mix. So, with the asset maturing and being much more prevalent in investment conversations, then its appeal is hardly surprising.”
For private credit funds underpinned by property, Cranfield argues they tap into the Australian love affair with real estate.
The total value of residential real estate in Australia is about $11.6 trillion – about three to four times the value of the ASX. And it’s estimated about 55 per cent of household wealth is in real estate.
“Investors know property. So, an investment opportunity that’s offering a return far greater than bank interest and, with the right due diligence, a prudent choice for a percentage of their portfolio, it’s little wonder it’s enjoying growing investor interest,” he says.
