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Vado Private has welcomed a move by global ratings agency Moody’s and index provider MSCI to create a global risk assessment methodology for private credit investments amid surging demand for alternative lending sources.
According to the Reserve Bank of Australia (RBA), business credit grew by 8.6 per cent over the year to 31 March 2025, up from 7.3 per cent the previous year.
“The global private credit industry, estimated at US$2.5 trillion, is solidifying its role as a vital source of finance for businesses by offering faster loans with more flexible terms than traditional forms of business credit from banks,” said Simon Arraj, founder and responsible manager of Vado Private.
“In recent times, a tremendous amount of capital has been raised by alternative asset managers in Australia. The demand for private debt is strong. As the market expands, investors will benefit from independent assessments of credit risk, so we welcome the move by Moody’s and MSCI.
“The need for consistent risk assessment tools will enable investors to better compare private credit investments and allow product providers to provide more transparent information about risk.”
Moody’s and MSCI have agreed to develop a standard methodology to help investors evaluate the risks in private credit markets. MSCI’s private capital database includes data on more than 2,800 private credit funds and over 14,000 corporate borrowers worldwide.
“In Australia, there is a strong demand for private credit. This demand has been fuelled by family offices looking for investment opportunities and by the instability in the stock market, which has led investors to seek less volatile options like corporate debt investments,” Arraj said.
A new report, Australian Private Capital 2025 Yearbook by Preqin and the Australian Investment Council, confirmed that more global private credit managers are launching funds targeting Australia’s private wealth investors. Private credit is increasingly attractive due to its floating-rate nature, particularly in a high-interest-rate environment.
“Even with the economic uncertainty, business lending is still growing strongly in 2025. According to data from the RBA, business credit increased by 8.6 per cent in the year leading up to 31 March 2025, compared to 7.3 per cent the previous year. In contrast, home lending has grown more slowly, at just 5.7 per cent in March 2025,” Arraj said.
The RBA has said that while private credit remains a smaller part of overall business lending, its role is expanding. It also reported that default rates in private credit have been lower than those seen in leveraged loan or high-yield bond markets.
Private credit typically involves direct loans from non-bank lenders to businesses, with a focus on middle-market firms. Asset managers act as intermediaries, connecting investors – including pension funds, insurance firms, family offices, sovereign wealth funds, and high-net-worth individuals – to these private credit opportunities.
Most private credit vehicles are structured as closed-end funds, often with lock-up periods of five to 10 years and restricted redemption terms, reflecting the long-term nature of these investments.
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