Recent developments in the Australian private credit market have attracted considerable attention, particularly following news involving Metrics Credit Partners and other private credit managers. For investors with exposure to this asset class, headlines about valuation adjustments, suspended trading and temporary restrictions on redemptions can understandably raise questions about what is happening and what it means for their portfolio.
Some Priority Advisory Group clients have exposure to private credit as part of a diversified investment portfolio. While recent developments warrant attention and ongoing monitoring, it is equally important to understand what is driving them and to distinguish short-term valuation and liquidity issues from permanent investment losses.
Private credit is not immune from risk or volatility, nor is any other investment. However, periods such as this are also an important reminder of why investment decisions should be viewed in the context of a diversified portfolio, appropriate investment timeframe and carefully considered long-term strategy.
What is happening in the Australian private credit market?
Private credit refers broadly to lending provided by non-bank investors and fund managers directly to businesses and other borrowers. It has grown significantly in Australia over the past decade and is now an important source of finance across areas including corporate lending, property, construction and asset-backed lending. EY-Parthenon estimates that Australian private debt assets under management reached $234.5 billion in 2025.
As the sector has grown, scrutiny has increased. The Australian Securities and Investments Commission (ASIC) has been paying particular attention to private credit valuation methodologies, governance, disclosure and liquidity management. In June 2026, ASIC called on private credit funds to ensure asset valuations were current, accurate and based on realistic assumptions, noting emerging borrower stress and tighter liquidity conditions.
Recent economic conditions have added to this pressure. Higher borrowing and construction costs, inflation, refinancing challenges and uncertainty across sectors including property and construction have made conditions more difficult for some borrowers. EY has characterised 2026 as an important test of resilience for the sector, with greater emphasis now being placed on credit quality, governance, underwriting and the ability of managers to navigate periods of stress.
Why has Metrics Credit Partners been in the news?
Metrics Credit Partners has been the focus of considerable recent attention following its year-end audit process.
On 28 September 2026, three ASX-listed Metrics funds were suspended from trading while differences between preliminary financial information and audit findings were addressed. These included the Metrics Master Income Trust (MXT), Metrics Income Opportunities Trust (MOT) and Metrics Real Estate Multi-Strategy Fund (MRE). The resulting adjustments varied considerably between the three funds. For MXT, for example, its expected 30 June net tangible asset (NTA) backing was reduced from $2.00 to $1.96 per unit, a reduction of 2%.
Importantly, the announcement concerning MXT stated that the differences did not represent realised losses or a conclusion that the investment strategies and forecast cash flows would not be achieved. Instead, different inputs and probability weightings were used when determining valuations and expected credit-loss provisions.
These are significant developments and we believe they should be monitored carefully. At the same time, a temporary restriction on liquidity or an adjustment to the reported value of an investment should not be interpreted as an equivalent permanent loss of investor capital, because it is not.
Some Priority clients only have exposure to MXT and Metrics direct income fund. This is an important distinction as there are material differences in the underlying investments between the Metrics products reported in the media. MXT and Metrics Direct Income Fund have no exposure to property development loans and are all backed by real assets. Income return targets are lower for these products, which reflects the greater security for investor capital – a key consideration for a well-diversified portfolio.
For those clients who do have some exposure to Metrics, it is also important to note that our licensee research team continues to monitor these investments closely. Lonsec has placed the relevant Metrics entities on “Fund Watch”, while Zenith has classified them as “Under Review”. At this stage, the Metrics investments held by Priority clients remain on our licensee’s approved product list. Should this change, or should developments mean we need to consider other steps, we will be in touch directly.
Why private credit valuations can move
One important distinction between private credit and publicly traded investments is how assets are valued.
Shares in listed companies, for example, trade regularly on an exchange, providing a readily observable market price. Many private credit investments do not trade frequently in an active market. Their valuation therefore requires assumptions about factors such as expected cash flows, the financial position of borrowers, collateral values, potential credit losses and the likelihood and timing of different outcomes.
ASIC has specifically identified valuation as an area requiring improvement across the Australian private credit market. It has noted that private assets can present heightened valuation risks because of infrequent trading and limited price discovery, and has called for valuations to respond appropriately to changing economic circumstances rather than waiting until a formal default occurs.
That may mean Australian investors see greater movement in reported private credit values as valuation standards continue to evolve. In some circumstances, a fund may recognise a potential downside earlier even where the ultimate outcome of the underlying loan remains uncertain. Conversely, an unrealised valuation adjustment should not be dismissed: it reflects updated assumptions about risk and may ultimately translate into a realised loss.
For investors, the eventual outcome of individual loans, including defaults, collateral values and recovery rates, remains important to long-term returns.
Diversification and manager selection remain important
Recent events also highlight why not all private credit investments should be considered alike.
The quality and diversification of underlying loans, lending standards, liquidity arrangements, governance and the manager’s ability to deal with borrowers experiencing financial stress can all influence investment outcomes.
This is particularly relevant as the sector matures. EY notes that the current environment is exposing differences in portfolio quality, underwriting discipline and risk management between managers. It expects factors such as disciplined underwriting, diversified portfolios, active management and strong governance to become increasingly important as the market evolves.
For Priority Advisory Group clients with private credit exposure, these investments form part of broader portfolios constructed with diversification and long-term objectives in mind. Our approach is not based on assuming that individual investments will never experience periods of difficulty. Rather, diversification is intended to reduce reliance on any single investment, borrower, manager or asset class. Position sizing and liquidity are also important considerations, particularly with private credit investments where access to capital may be more restricted during periods of market stress.
Avoid making long-term decisions based on short-term headlines
Periods of heightened uncertainty can make investors feel that they need to act quickly. Yet reacting to headlines or short-term market movements without considering the broader strategy can introduce a different type of risk.
Volatility is a normal feature of investing, although it can appear differently across asset classes. With listed investments, changing sentiment can be reflected almost immediately in market prices. With private assets, changes can emerge through revised valuations, changes to liquidity or, eventually, realised investment outcomes.
Neither should be considered in isolation.
The more useful questions are whether an investment continues to play an appropriate role within your portfolio, whether its underlying risks remain consistent with your objectives and risk tolerance, and whether your investment timeframe allows you to navigate periods of uncertainty.
This does not mean ignoring changing circumstances. A sound long-term strategy still requires monitoring and may sometimes require adjustment. The distinction is between making a considered decision based on evidence and personal circumstances, and making a reactive decision primarily because markets or headlines have become uncomfortable.
Staying focused on your long-term investment strategy
The Australian private credit market is experiencing a period of greater scrutiny, evolving valuation practices and challenging conditions for some borrowers and managers. Recent developments involving Metrics reinforce the importance of transparency, sound governance, diversification and careful manager selection.
They also reinforce a broader investment principle: short-term uncertainty should be considered within the context of your overall financial plan.
At Priority Advisory Group, we continue to monitor developments across investment markets and the investments used within client portfolios. Where circumstances change materially, we consider those developments against each investment’s role within the broader portfolio and our clients’ long-term objectives.
If recent private credit news has left you concerned about your investments, speaking with your adviser can help put those developments into context. Rather than making a decision based solely on short-term market sentiment or media hype, we can review your portfolio, investment timeframe and objectives and determine whether your existing strategy remains appropriate.
Call Priority Advisory Group on 1300 349 188 to speak with our Personal & Family Wealth team about your investment strategy.
This information is general in nature and does not take into account your personal objectives, financial situation or needs. Investment values can rise and fall, and past performance is not a reliable indicator of future performance.