A maturing US$3 trillion asset class: what’s under the hood is what matters  

Private credit continues its rapid expansion and is now firmly established as a core allocation for global investors. The asset class now exceeds US$3 trillion globally and is expected to grow beyond US$5 trillion within the next three years.¹  

That growth has been well earned. Private credit has evolved from a niche, high-risk alternative with only US$40 billion in total global allocations at the turn of the century,² to a genuine alternative form of fixed income focused on providing real world financing. Today, much of what sits within ‘private credit’ resembles lending banks historically undertook but now cannot, or choose not to, due to capital constraints, speed, regulation, or operating inefficiencies. This structural shift has elevated the asset class into a meaningful pillar of investor portfolios.

Private credit has continued to outperform traditional fixed income over three, five and 10-year time horizons. Investors have benefited from direct access to lending opportunities with structural protections, asset-backing or defensive characteristics that can generate income with capital preservation features. 

In any environment where many investors remain cautious about duration risk and volatility, especially in the more defensive part of their portfolios, private credit – when executed well – has delivered on its core promise: regular income and capital stability.  

As the asset class matures however, growth and headline returns alone are no longer sufficient points of differentiation. In 2026, the defining question for investors is no longer “Do I have exposure to private credit?” but rather “What do I own – and how resilient is it?” In simpler terms, the focus has shifted to what lies under the hood.

Beneath similar labels lie materially different portfolios 

As private credit has evolved from opportunistic lending toward higher quality, performing credit, it has become increasingly clear that not all private credit is created equal. 

The proliferation of funds, strategies and structures has led to a widening dispersion of potential investor outcomes. Beneath superficially similar labels sit materially different portfolios with significant variation across: 

• Investment and portfolio management practices 
• Asset quality  
• Portfolio construction and granularity 
• Risk tolerance and management 
• Transparency, governance and alignment.  

In benign market environments these differences can be masked. Over a full market cycle however, they cannot. As Warren Buffett has famously observed, it’s only when the tide goes out that you see who’s been swimming naked.

Transparency, governance and alignment now front and centre 

As private credit has scaled, so too has regulatory and investor focus on disclosure, governance and valuation practices. This scrutiny is healthy and necessary for the long-term credibility and sustainability of the asset class. 

In 2026 what matters is not simply reported performance, but how that performance is generated, monitored and protected. For investors, this means a clear understanding of: 

• How loans are structured and where they sit in the capital structure 
• What must occur for the first dollar of capital loss to be incurred 
• How portfolios are monitored, stress-tested and managed through change  
• Whether reported valuations stand up to scrutiny and reflect economic reality 
• And critically, whether the manager is truly aligned with investors to deliver targeted outcomes through different market conditions. 

At MA Financial, we have long believed transparency is not a checkbox exercise, but rather a core responsibility of capital stewardship. Our investment process, portfolio reporting and governance frameworks are designed to enable investors to answer the hard questions before they are asked.

That is not to say we cannot do more. We are always looking for ways to improve not only our processes and credit strategies, but also our approach to investor communication and disclosure.

In this spirit, we undertook a substantial refresh of our disclosure frameworks in 2025. For example, in our flagship Credit Income Fund suite, our December 2025 quarterly report is 37 pages long. This report supplements our monthly portfolio, investment and performance reporting with detailed disclosure on asset composition, investment characteristics, counterparty exposures, fees, leverage, credit risks, liquidity and other information we believe matters to investors. Similarly, our real estate credit fund since launch in early 2018 has provided investors with details of the portfolio construction and assets that sit within the ‘Watch List’ – traditionally an uncommon disclosure in the sector.

Real estate credit: the increasing importance of assets of enduring value  

Identifying assets of enduring value will become increasingly important in 2026. We expect residential markets in particular to remain a key focus as governments address the nationwide housing shortage, underpinned by sustained demand and persistent structural undersupply, particularly in the affordable and social housing markets.

Progress is being made to unlock housing supply and improve delivery efficiency. While this is broadly positive for the market, it introduces the risk that policy settings become overly focussed on hitting headline supply targets versus meeting demand at a local level. As a result, we see a heightened risk of oversupply in some markets. Notwithstanding this we remain positive on demand for well-located, high quality residential assets suitably designed for their location.

Construction conditions remain challenging, though pressures have continued to ease with many projects in 2025 delivered on time and on budget. Looking ahead, we expect further reductions in government red tape and associated cost inefficiencies to enhance the viability of new supply.

In 2025 we accurately forecast elevated risk in mezzanine debt and preferred equity, and we maintain this view through 2026. This reflects the very limited ability to truly understand the risk position at any given point of time, as well as the constrained ability for investors to meaningfully influence outcomes or mitigate risk in these sectors.

By contrast we continue to remain positive on senior credit secured by fundamentally good assets: those with enduring value. Well-designed, high-quality assets that are fit for purpose and appropriate for their location tend to be less volatile during market dislocations and quicker to respond as markets normalise. When appropriately valued and managed, senior principal positions are well placed to withstand significant market stress and volatility.

Alignment and downside management still matter most 

In prior outlooks, we emphasised that success in private credit investing is about avoiding losers, not picking winners. This principle remains unchanged. 

The most effective way to achieve this is through alignment of interests. Managers with meaningful skin in the game, robust governance and genuine workout capability behave differently when conditions tighten. They structure loans more conservatively, monitor portfolios more actively, and intervene earlier when risks emerge. 

As at the end of 2025, MA Financial and its staff had over $230 million³ invested alongside clients across our private credit strategies. This level of co-investment reinforces an owner’s mindset and our philosophical belief that managers should have their capital at risk, aligned with their investors across all market cycles.  

Low-probability events still happen and markets inevitably change. While timing cannot be predicted, it doesn’t need to be – what matters most is that portfolios are built, and managed, to withstand them.  

Looking ahead: disciplined growth, not blind expansion 

Private credit will continue to play a vital role in capital formation, particularly as banks further rationalise balance sheets and regulatory frameworks remain tight.  

We expect continued growth in areas such as asset-backed lending, specialty finance and bank partnership opportunities, where structure and diversification provide resilience. 

However, we remain cautious on undifferentiated capital chasing yield, loose underwriting, and strategies that rely on favourable conditions rather than structural protection. 

In 2026, the opportunity set remains attractive – but selectivity, transparency and discipline are paramount. 

As the saying goes, anyone can polish the bonnet. What ultimately matters is what sits under the hood – and whether it’s built to last.