Why it’s a “phenomenal time to be investing” in this asset class

Private credit has become a lightning rod for criticism. Nehemiah Richardson explains why the opportunity remains compelling.

Please note that this interview was recorded Monday 18 May, 2026

Private credit has become one of the most talked-about asset classes in markets, but not always for the right reasons.

Over the past year, investors have been bombarded with headlines about liquidity restrictions, redemption caps, gating, and Jamie Dimon’s now-famous “cockroaches” remark. For some, those stories have raised legitimate questions about whether private credit’s rapid growth has created risks lurking beneath the surface.

Yet according to Pengana Credit Chief Executive Officer and Managing Director Nehemiah Richardson, much of the debate is focusing on the wrong issue.

Rather than worrying about a systemic problem across the asset class, Richardson believes investors should be paying closer attention to the distinction between liquidity structures and underlying credit quality.

In his view, many recent headlines say more about how certain investment vehicles operate than about the health of private credit itself. As he puts it:

“Most private credit operators today – and the quality ones will tell you – it’s actually a phenomenal time to be investing.”

In the interview above, Richardson argues that investors are focusing on the wrong risks. He explains why diversification matters, where global private credit differs from Australia, and why the asset class should be approached as a strategic allocation rather than a tactical trade.

INTERVIEW SUMMARY

The headlines are missing the bigger picture

Richardson believes much of the recent negativity surrounding private credit has been misplaced.

While market commentary has focused on concerns about liquidity restrictions and redemption limits, he argues investors should distinguish between vehicle structures and underlying credit quality.

According to Richardson, fears of widespread credit problems across the sector are largely unfounded.

“There is not some systemic credit issue happening in the sector.”

Recent headlines have largely centred on open-ended vehicles that offer periodic liquidity despite investing in inherently illiquid assets.

Richardson argues those structures were deliberately designed with redemption limits to protect investors and preserve portfolio integrity. Rather than viewing those restrictions as a weakness, he sees them as evidence that the system is working as intended.

He adds that while some managers may face challenges, the real story is increasing dispersion across the sector rather than a broad deterioration in credit quality.

In his view, investors should focus less on the headlines and more on the quality of the underlying assets and the role private credit can play in a diversified portfolio.

Why global and Australian private credit look very different

One of Richardson’s key messages is that investors should not assume Australian and global private credit markets are interchangeable.

Australia remains heavily bank-centric, with the overwhelming majority of commercial lending still conducted by banks. Private credit plays a much smaller role and is concentrated in a narrower range of opportunities.

By contrast, global markets offer significantly greater scale, breadth and diversification.

“In Australia, you’re much more concentrated”, he says.

Australian private credit tends to focus on commercial property lending, mezzanine financing and syndicated transactions. Global markets provide exposure across a far broader range of industries, borrowers and economic drivers.

“It doesn’t mean that Australian private credit is not as good as global or vice versa. I just think they’re different.”

According to Richardson, Australia simply does not offer the same breadth of opportunities. He notes that investors can diversify by industry, geography and strategy far more effectively in global markets than they can domestically.

Global exposure can potentially reduce concentration risk and provide access to a much broader opportunity set than Australia alone.

Diversification matters more than yield

If there was one theme Richardson returned to repeatedly, it was diversification.

His argument is simple. Private credit investments are inherently illiquid, which means investors cannot easily rebalance portfolios when conditions change. That makes diversification far more important than many investors appreciate.

Rather than concentrating exposure with a single manager, strategy or geography, Richardson believes investors should spread risk across multiple return drivers.

Senior secured corporate loans, asset-backed lending and opportunistic credit strategies each perform differently through various economic environments. Combining them can help improve resilience and reduce dependence on any single outcome.

“You don’t want to put all your apples in one basket.”

Richardson believes diversification matters because investors are not rewarded for concentration risk in credit investing.

“In credit you get no upside, you only get downside. To minimise your downside, you want to diversify.”

Private credit is not a single asset class with a single risk profile. Different strategies can produce very different outcomes, making diversification a critical consideration for investors.

Access matters as much as asset allocation

One challenge for Australian investors is that many of the most attractive opportunities in global private credit are difficult to access directly.

Many specialist managers have high minimum investment requirements and limited capacity, making them largely the preserve of institutions and large family offices.

That is one reason Pengana has appointed Mercer, one of the world’s largest institutional advisers and private markets allocators.

Richardson says Mercer brings decades of experience researching private credit managers globally, helping identify opportunities, assess governance standards and construct diversified portfolios across multiple strategies.

“How do you identify those managers and then secondly, from that identification, how do you pick out the best ones?”, Richardson asks.

Mercer has been investing in and researching private credit since the asset class emerged after the Global Financial Crisis. Its scale also provides access to managers and strategies that many investors would struggle to access independently.

The partnership is designed to give investors exposure to a globally diversified portfolio spanning multiple managers, sectors, and credit strategies, rather than relying on the fortunes of a single manager or market segment.

For investors, the appeal is not simply access. It is access combined with institutional-grade due diligence, governance oversight and diversification.

Think allocation, not trade

Perhaps Richardson’s most important message is that private credit should be viewed as a strategic portfolio allocation rather than a tactical investment.

While some listed vehicles provide daily liquidity through market trading, the underlying assets remain fundamentally illiquid. Investors who approach private credit as a short-term trade may be misunderstanding the role it is designed to play.

Instead, Richardson argues investors should think carefully about which portion of their capital can be committed for multiple years in exchange for higher returns.

By accepting reduced liquidity, investors can potentially earn a meaningful premium over cash and traditional fixed income. Richardson points to opportunities ranging from several percentage points above the cash rate through to strategies targeting returns of cash plus 7% to 9% for investors willing to lock capital away for longer periods.

Equally important, he argues that private credit has historically delivered those returns with relatively low volatility.

“It’s a great asset class because it’s one of the few that actually has a return that is below the annualised volatility.”

That combination of income generation, diversification, and relatively stable returns is one reason investors continue allocating capital to the asset class despite the recent negative headlines.

For Richardson, however, success ultimately comes back to mindset. Private credit is not designed for money investors may need tomorrow. It is designed for capital that can be invested patiently through market cycles.

“You want to be strategically allocated.”

For Richardson, that means treating private credit as a permanent part of a portfolio rather than something to trade in and out of as market conditions change.

Private credit may continue to attract headlines, but Richardson believes long-term outcomes will be driven by diversification, access to quality managers and patience. Investors who approach the asset class with that mindset may find the opportunity is far more compelling than the recent headlines suggest.

By Chris Conway, Livewire Markets. View the original article here.