Should regulators rein in private credit markets?

The financial system is experiencing a seismic shift. While public listings in countries like Australia are at a two-decade low, private capital markets have expanded as businesses seek alternative sources of funding and investors eye diversification and higher returns.

The world of private capital, where debt and equity are invested in privately owned companies, was valued at US$11.87 trillion (A$18.2 trillion) in 2023 and is projected to hit US$18 trillion (A$27.6 trillion) by 2027.

Private equity, which involves taking an ownership stake, accounts for nearly half of the market in Australia, although private capital fundraising in 2024 was at the lowest level in a decade.

While the venture capital arm of private markets gained muscle during the tech boom of the early 2000s, investor sentiment has been more cautious in recent years. The private market’s third arm, private credit, is a different story.

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