Private credit investors in Australia are tired of guessing what their money is actually worth.
They are asking fund managers who lend to property developers for more openness as the housing market cools and regulators start digging into how those loans are valued.
Higher interest rates and tax reforms are squeezing the existing, and that pressure is flowing straight back to the lenders who finance the builders.
Private credit works like this: instead of borrowing from a bank, developers take funds from a pool of investors. It is a fast-growing corner of finance, and in Australia it is big business. Local developers make up about half of all borrowers in the country's A$200 billion private credit industry.
MA Financial Group, a major player managing A$15.5 billion ($11 billion), provides a lot of that lending to the housing market. Co-CEO Chris Wyke says the questions coming in from investors are getting sharper.
"Investors are looking deeper into really understanding what the underlying assets are," Wyke said.
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They want to know more about how properties are valued, which loans are not being repaid, and what recovery levels actually look like when a deal goes wrong.
The concerns are not just coming from investors. The warning was direct: valuations should be based on realistic assumptions, not wishful thinking.
That matters because the global private credit market is enormous, worth $1.8 trillion. Earlier this year, U.S. lenders imposed exit restrictions that caught some investors off guard, and the worry is that similar surprises could unfold elsewhere.
Ed Brooke, a partner at investment firm Escala Partners, says the pain in construction is real and delayed. "We are seeing a steady rise in construction costs and timelines and a lot of the losses haven't been crystallized yet due to the delays," Brooke said.
In plain terms, losses are piling up on paper but haven't formally hit anyone's books yet. That could change.
Escala's clients have portfolios ranging from A$10 million to A$200 million, and they are pushing for clearer answers before putting more money in. Brooke says better information helps everyone. "We and our clients can make better investment decisions," he said.
Wyke has a specific piece of advice for anyone lending against real estate: know where you stand in the capital structure. "In the real estate credit space, I think investors should be asking the question, if I've lent against real estate, where do I sit in the capital structure?" he said.
That means understanding whether you're a senior secured lender, who gets paid first if things go wrong, or a mezzanine lender, who takes more risk for a higher return. "Am I senior secured or am I mezzanine since the outcomes and the rights vary tremendously depending on the type of investment," Wyke said.
Many global firms have launched what are called evergreen funds, which stay open for continuous investing, to attract wealthy Australians who want into private markets. But with that growth comes a need for better information.
The Australian Securities & Investment Commission will publish its priorities and plan on Wednesday, and investors will be watching closely.
The bottom line: The private credit boom is hitting a rough patch, and the people who put money in want to see exactly what they own. More transparency could mean fewer ugly surprises down the road. For now, the message from investors is simple: show us the numbers.
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