Does a slowing economy increase the risk of loan defaults in private debt?

Well-run private debt funds use rigorous scenario testing and real-time monitoring to mitigate risks. Historical net write-offs by banks peaked at just 0.68% during the GFC and were 0.04% in September 2024, demonstrating strong resilience across economic cycles.

Does a loan default always result in a credit loss?

No. Private debt investors are protected by their seniority in the capital structure. Senior debt holders get repaid first, before subordinated debt, preferred equity, and common shareholders. Covenants and controls act as early warning signals allowing lenders to engage with borrowers to mitigate financial loss.

Are all private debt managers the same?

No. Private debt managers differ significantly in scale, credit skills, and experience. Quality managers need sizable assets under management, bank-level credit skills, extensive networks, and the ability to directly originate and diversify loans across borrowers to achieve optimal outcomes.

Does commercial real estate debt put capital at risk in a property downturn?

Property owners face greater risk than lenders. With typical loan-to-value ratios of 60%, owners' equity acts as a buffer. Even if property values fall significantly, lenders can compel borrowers to restore their position or pursue asset sales to maximize recovery without necessarily incurring losses.

Are non-bank lenders lenders of last resort?

No. Competent private debt managers lend to quality companies and often compete with banks or work alongside them in lending syndicates. Post-GFC regulations requiring banks to hold more capital have created financing gaps that private debt fills for established companies with sound fundamentals.

Research Paper: Six Trends for Private Credit in 2026

Metrics Credit Partners has released its latest research paper, Six Trends for Private Credit in 2026, exploring the opportunities and challenges shaping the sector in the year ahead.

Private credit has proven its durability through 2025, with fundamentals strengthening despite heightened competition and regulatory review.

Looking ahead to 2026, six key trends are expected to shape opportunities and risks across the sector.

1. Cautious optimism as global headwinds subside – easing geopolitical tensions and stronger growth prospects in the US and China could reinforce confidence across economies.

2. Interest rates may not fall as much as anticipated – inflationary pressures suggest a prolonged period of stable rates, supporting investor returns while borrower demand remains strong.

3. Market fundamentals are likely to improve further – residential development, industrial property, and corporate lending are expected to strengthen, creating robust demand for private credit.

4. Establishing industry standards should be a positive for private credit: ASIC’s review of the sector is set to drive improved transparency and reporting, enhancing investor confidence.

5. Private credit’s strong growth is expected to continue – capital inflows remain robust, with corporates planning to lift private credit funding significantly.

6. Lending competition is expected to remain strong – non‑bank lenders and banks will compete intensely for prime deals, with differentiation shifting toward speed, flexibility, and structure.

CEO Perspective

“As we move into 2026, Metrics sees a private credit sector that is both expanding and evolving. Capital inflows into the asset class continue to accelerate, underscoring investor confidence in private credit’s resilience and its ability to deliver attractive outcomes in an environment of heightened global uncertainty. We also expect confidence in private credit to strengthen as regulatory clarity emerges. ASIC’s industry driven approach to standards will enhance transparency and trust, and Metrics intends to play a leading role in shaping this framework.”

— Andrew Lockhart, CEO & Managing Partner, Metrics Credit Partners

Read Research Paper

Disclaimer: Metrics Credit Partners Pty Ltd ABN 27 150 646 996 AFSL 416 146 (Metrics). All rights reserved. While all due care has been taken in preparing this document, Metrics makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Reproduction of any part of this document is prohibited without the express permission of Metrics. The content is for educational or information purposes only and is not intended to provide you with financial advice. It has been prepared without taking into account your objectives, financial situation or needs. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, Metrics excludes all liability for any loss or damage arising in any way due to or in connection with the publication of this content, including by way of negligence. Past performance is not an indicator of future performance. Forward looking statements should not be relied upon. All investments contain risk and may lose value.

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