Private credit opportunities in a late-cycle market

As private credit grows into a global asset class exceeding $1 trillion, investors in a maturing credit cycle must adopt smarter strategies to balance yield with resilience, Jenna Hayes, executive director, capital markets at Income Asset Management says.

With cash offering minimal returns, Hayes says rushing into deals risks overpaying for weaker assets. Instead, she highlights senior secured syndicated loans as a compelling, defensive option for wholesale high-net-worth investors.

“Senior secured syndicated loans give investors the ability to access high-yield opportunities, often above nine per cent per annum, while maintaining defensive characteristics in their portfolios,” Ms Hayes says.

Despite regulatory scrutiny, including ASIC establishing a dedicated taskforce and releasing a discussion paper on the systemic risks of private markets, Hayes says the outlook for private credit remains constructive when managed with discipline.

“Private credit, done well, benefits both the economy and investors,” Ms Hayes says.

“The key is ensuring there are frameworks in place and that investors are selective in how they deploy capital.”

Direct investment in syndicated loans offers significant advantages, including timing flexibility, transparency, and direct control over credit quality, collateral, and covenant protections. Unlike pooled funds pressured to meet deployment targets, direct ownership allows investors to underwrite each loan on its merits.

“Syndicated loans are structured with ongoing maintenance covenants, scheduled amortisation and cash-sweep provisions that help protect investors in a downturn,” Ms Hayes says.

“They are secured by large asset bases and strong cash flows across diverse sectors, from infrastructure to financial services.”

Looking ahead, regulatory changes such as APRA’s phase-out of hybrid bonds by 2032 and proposed Division 296 tax changes are expected to further drive demand for income-focused investments.

“As likely RBA rate cuts eat into term deposit returns, investors are seeking yield stability and tax efficiency,” Ms Hayes says.

“Syndicated loans offer a powerful trifecta of yield enhancement, credit quality and diversification, which can be particularly valuable in a late-cycle environment.”

Ms Hayes said that as regulatory scrutiny intensifies and markets face greater uncertainty, the appeal of syndicated loans for wholesale investors will continue to rise.

“In an era defined by late-cycle uncertainty, the ability to generate premium income without sacrificing resilience is invaluable,” Ms Hayes says.

“That’s what makes syndicated loans such a compelling opportunity for investors today.”