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.

Stronger Portfolios Start with Private Debt

“I’m a big advocate for private debt in investor portfolios. I believe it delivers stability of capital and an attractive source of income. The protections that are available in terms of the covenants, the controls, the taking of security is designed to protect investor capital. It becomes a very attractive investment when you gain exposure to a fund that holds a well-diversified portfolio of private debt assets.” – Andrew Lockhart, Chief Executive and Managing Partner of Metrics Credit Partners

As market conditions shift, many investors are turning to private debt to help safeguard their portfolios.

With reduced volatility, reliable income and effective downside protection, the asset class is emerging as a key defensive allocation for those seeking both yield and low capital volatility.

Metrics, which manages more than A$30 billion in assets, continues to focus on disciplined capital deployment, diversification and active risk management to deliver consistent returns.

In a wide-ranging discussion at the Income & Defensive Symposium 2025, CEO and Managing Partner Andrew Lockhart highlights how private credit—when paired with an experienced manager—can deliver strong outcomes for investors, even in uncertain markets.

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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