Alan Greenstein
The rapid growth of Australia’s private credit sector has outpaced investor understanding of the asset class, creating a gap between rising participation and a deeper appreciation of the risks, opportunities, and structural differences that distinguish high-quality strategies from the rest of the market, according to real estate private credit investment manager, Zagga.
Now valued at ~$235 billion in assets under management (AUM)[1] , the Australian private credit market has achieved a compound annual growth rate (CAGR) of 21 percent over the last decade,[2] compared with ~5 percent for bank debt and bonds[3] . It is on track to have more AUM than the local bond market by 2029, moving from a niche asset class to a core portfolio stabiliser and significant, rising source of commercial financing.
Zagga CEO and Co-Founder, Alan Greenstein, whose firm has deployed more than $3 billion in funding to Australian real estate, said this growth is set to accelerate but private credit is not a homogenous asset class and more must be done to ensure every investor understands both the risks and opportunity.
“Private credit can offer investors significant upside with stable income, attractive risk adjusted returns, and uncorrelated portfolio diversification. As macro headwinds intensify and fiscal policy tightens, this appeal has seen more investors – from institutions to individuals – drawn to the asset class,” Mr Greenstein said.
“Yet, not every investor has the experience or expertise to understand the complexities of private credit and the vast and varied opportunities within it. For example, US corporate credit carries a significantly different risk profile to Australian real estate private credit. We have seen global investors caught unaware by this, with the current rhetoric around gating and liquidity highlighting the need for more investor education.”
Once the domain of institutional investors, private credit is now seeing rising demand from family offices and sophisticated individuals. UBS data highlights almost 80 percent of family offices intend to maintain or grow their private credit allocations over the next five years[4] , while high-networth investors and self-managed-super funds (SMSFs) account for over 50 percent of Zagga’s AUM.
“Diversification and downside protection are becoming harder to come by in this environment and private credit, especially backed by quality, real assets, can be an attractive addition to portfolios.
“To realise these benefits, investors must do their due diligence – understand how their capital is invested, where it is being deployed, who is managing it (experience and track record), and what risks are associated. As an industry, we have a responsibility to act with transparency, ensuring our investors can access and understand this detail.”
Investor education in focus for milestone anniversary
Celebrating its nine-year anniversary this month, Zagga has grown from its initial 30 investors, with $40 million AUM and $60 million deployed in its first year, to ~$3 billion invested across more than 350 transactions in the Australian real estate sector. Its investor base now exceeds 1,000 entities, globally, and it is on track to close the financial year with ~$1 billion in new originations.
To mark the milestone occasion, and address the education gap, Zagga has launched an educational whitepaper series spotlighting real estate private credit and homing in on the topics that are keeping investors up at night.
Greenstein said celebrating the milestone anniversary with a focus on investors is true to the origins of the Zagga business and its commitment to being “investor-first”.
“Being an investor-first business is more than a tagline to us, it informs every decision we make and ensures capital preservation remains at the heart of our strategy. It’s why our founding investors and executives remain with us today as our business has grown nearly ten-fold,” Mr Greenstein said.
“We know returns are just part of the story. As the opportunity evolves, investors rely on us as trusted experts to help them understand and access quality Australian real estate private credit opportunities in a way that best suits their risk appetite. This whitepaper series aims to complement our existing investor resources and affirm our unwavering commitment to transparency, trust, and partnership – values our business was founded upon.”
The first whitepaper of the series focuses on Opportunity through uncertainty deep diving into the changing investment landscape, risks and opportunities in global private credit, why Australia continues to attract attention, and the importance of governance and risk management for those exploring private credit.
“Capital continues to need a home and the global search for stability is on,” Mr Greenstein said. “Conditions in US corporate credit have tightened, while the UK and Europe have seen capital struggling to be deployed. Australian real estate private credit has largely differentiated itself due to its backing by quality, underlying real assets, a resilient, demand-driven economy, well-regulated lending market, and the strong tailwinds powering our local property sector.
“In this environment, Australian real estate private credit remains an attractive proposition. Yet, as every facet of financial markets feel the pressure, the focus must be on governance, prudent risk management, and specialised, cycle-tested investment expertise.”
Commercial real estate lending now accounts for ~18% of the Australian private credit market, with $92 billion invested[5], and growing. This demand has seen Zagga enjoy 50 percent year-onyear growth, targeting $5 billion in AUM by 2030.
“We are at the forefront of one of the fastest growing segments of Australian private credit. Demand is only going to intensify – from both domestic and offshore investors – and we have a responsibility to remain transparent and help investors make informed decisions.
“Market cycles have become shorter and more intense. The fund managers that thrive are those that stop viewing borrowers and investors as mere participants and, instead, treat them as longterm partners through the inevitable peaks and troughs of the global economy.
“The ability to deliver across market cycles is now the baseline for trust. Experienced, specialist managers need to do more – we need to act as true partners, securing trust and transparency by ensuring investor education keeps pace with capital allocations. As growth of Australian private credit accelerates, so too must our best practice commitments to investors.”
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