Private Credit Under Scrutiny: What Borrowers Need to Know
A $160 million write-down at a major private credit fund and ASIC enforcement warnings are reshaping the risks for property investors.
Australia's private credit sector is facing its most direct regulatory challenge to date, and this week's events have crystallised what the risks look like in practice.
On Monday 28 September 2026, Metrics Credit Partners – manager of a $40 billion fund group – confirmed a $160 million write-down across three of its ASX-listed funds after its Metrics Real Estate Multi-Strategy Fund was suspended from trading. The fund's value fell by more than 12%, dropping from $388 million to $340 million. The manager disclosed that amounts in its preliminary report "may differ materially" from the upcoming audited figures, with changes to discount rates, capitalisation rates, development timeframes, expected cash flows and end sale values all contributing to the revised numbers.
MPA Australia reports that the fund's responsible entity, Perpetual, pulled trading pending a proper audit – a reasonable step, but the episode raises a question for any borrower or investor with exposure to private credit: is this a routine disclosure, or another crack in a sector regulators have all but declared open season on?
The Scale of Private Credit and Its Risks
A decade ago, private credit was a niche corner of Australian finance. Today, according to estimates cited by the Australian Securities and Investments Commission (ASIC), it is a roughly $200 billion sector – representing growth of close to 500% over ten years. Real estate accounts for an estimated 40 to 60% of that lending.
That rapid expansion has drawn intense regulatory attention. ASIC commissioner Simone Constant addressed a CAFBA summit earlier this month with a clear message: "We are now well beyond warnings. The sector should prepare for enforcement action."
The defining case study is Bathla Group, a Western Sydney developer with approximately $3.4 billion owed to more than 40 lenders across roughly 540 special purpose vehicles. Thousands of half-built homes were left in limbo when Bathla collapsed. Multiple private lenders exposed to its projects then shut down redemptions: CVS Lane froze new applications and redemptions after disclosing exposure through nine separate loans; Centuria Bass locked up several hundred million dollars in investor funds.
ASIC chair Sarah Court described Bathla as private credit's "first real test." RBA governor Michele Bullock went further, warning a parliamentary inquiry that a serious implosion in private credit "will wash back onto the banks."
A November 2025 ASIC review of 28 funds – spanning major managers and newer entrants – flagged opaque fee structures, inconsistent default terminology and weak governance around related-party transactions. The Metrics write-down is the latest development in a sequence that shows no sign of slowing.
What This Means for Borrowers Using Private Lenders
The risks in private credit have practical consequences for borrowers and property investors, not just fund managers.
As MPA Australia reports, a pipeline deal financed by a private lender is not insulated from that lender's own financial health. If a fund is forced to freeze redemptions, pause new lending or gets caught in a valuation restatement, a loan already structured by a broker can simply stop moving – with deposits paid, settlement dates locked in, and no certainty the funding will arrive on time.
La Trobe Financial chief executive Chris Andrews put the core question plainly in MPA Australia: "Did my money buy a loan, or did it buy a business?" Funds that hold equity alongside debt – as the Metrics Real Estate Multi-Strategy Fund did, describing a strategy "across the full capital structure from senior secured real estate debt through to real estate equity" – can carry conflicting incentives when a market correction forces hard decisions. National dwelling values have already fallen roughly 3.6% from their March 2026 peak, and Commonwealth Bank is forecasting a peak-to-trough decline of around 9%.
The Financial Services Council (FSC) released its Private Markets Best Practice Principles last month, requiring managers to disclose borrower-paid fees, related-party dealings and net interest margin arrangements that have historically obscured the true risk profile of some products. However, those obligations do not bind the sector until 1 July 2027, and even then apply only to the FSC's full members. Wholesale and sophisticated investor funds receive lighter treatment.
In practical terms, borrowers using private lenders today are operating under the same light-touch conditions that produced Bathla, the Metrics write-down, and several redemption freezes before them – with nothing mandatory changing until next July.
What Property Investors Should Check Before Proceeding
The appropriate response is not to avoid non-bank lending altogether. Private and specialist lenders play a genuine role for complex commercial or development deals that mainstream banks will not consider. But the current environment calls for more careful due diligence before committing.
Before placing a deal with a private lender, consider checking the following:
**Is the fund lending or investing?** Funds that mix debt and equity exposure in the same borrower carry layered risk during a downturn. Ask explicitly whether the fund uses investor capital to fund related entities or holds equity positions alongside its loan book.
**What are the liquidity and redemption terms?** Several funds froze redemptions this year without meaningful prior warning. Understand under what conditions you might not be able to access your capital, and how the fund prices its underlying assets between formal audits.
**When was the fund last independently audited?** The Metrics situation arose precisely in the process of finalising audited results. A fund that has not been recently and independently audited deserves closer scrutiny on its published valuations.
**Could a regulated mainstream lender meet your needs?** For property investment purposes, a range of regulated bank and non-bank lenders offer investor home loan products with clear terms and regulated disclosure obligations. If you are already using a private lender and questioning whether the cost and risk profile remains appropriate, our refinance savings calculator can help you model whether moving to a mainstream product makes financial sense.
The full picture on the Metrics write-down, the Bathla collapse and ASIC's shift toward enforcement is reported by MPA Australia.