Private credit has dominated financial headlines over the past two years as the result of both its rapid growth and ongoing scrutiny as it becomes more readily available to retail investors.

A flurry of new listed investment trusts (LITs) and listed notes this year likely brought it further onto the radar of advisers, including those seeking alternatives to bank hybrids for their income-hungry clients.

AUSIEX spoke to Frank Danieli, Head of Global Credit Solutions at MA Financial, to get his take on private credit investing and the questions advisers should ask before adding private credit LITs and notes to their clients’ portfolios.

MA Financial (ASX: MAF) is an ASX-listed global alternative asset manager with $13.3 billion under management, just under half of which is held in private credit strategies. Its MA Credit Income Trust (ASX: MA1) listed on the ASX in March this year and it recently announced the launch of the MA Credit Portfolio Notes (ASX: MA2HA), which are expected to commence trading on December 16.

What is the basis of MA Financial’s investment strategy?

Three things differentiate MA Financial’s private credit business: our alignment, proprietary origination and workout capabilities.

At MA, we believe in having ‘skin in the game’. MA and its staff have around $230 million co-invested in all our private credit strategies with our clients. We believe this is the highest level of alignment of any private credit manager in Australia. The firm itself is also about 30% owned by staff. 

The process we use to originate loans is equally important. The best private lending occurs when you have control over terms, pricing, security and covenants. You can only do this if you have real, direct origination capabilities. This is where the premium to traditional fixed income in private credit (when done right) should come from.

Finally, we believe credit is about avoiding losers, not picking winners. It should be boring. In every loan, we are simply entitled to be paid our interest and principal (before equity gets anything). This requires inverse thinking. It is about minimising the chance of losing money, rather than trying to engineer high compound returns. To do this well, you need to understand where credit breaks. 

This skillset is the ‘dark side of credit’. It involves working out debt gone wrong. Many of our most senior private credit professionals have this background and skill set. We use that IP to minimise the instance of problems, but most importantly – even if something doesn’t quite go right – we know how to go in, roll up our sleeves and get our money back as a creditor senior to equity in the capital structure. 

MA has a strategic advantage in this area due to other expertise within the broader business. Our corporate advisory division, MA Moelis Australia, is a local leader in restructuring as recapitalisations, while our strategic alliance partner Moelis & Company has a leading position globally. 

What is the difference between MA1 and MA Credit Portfolio Notes?

MA1 is designed to provide curated access to MA Financial’s flagship private credit strategies, with daily liquidity via the ASX. Today, it provides exposure to a $5.7 billion underlying portfolio spanning 224 positions. The portfolio is diversified across 28 different credit sub-segments within our three core investment strategies of direct asset lending, asset backed lending and direct corporate lending. 

This diversification paired with our alignment, proprietary origination and workouts capabilities is designed to achieve a consistent monthly income objective of the RBA Cash Rate + 4.25% per annum for investors.

As a listed investment trust, trading performance also matters. Since inception, it has consistently traded around its net asset value (NAV) averaging 100.4% of NAV since listing, as of the September quarter end. 

The MA Credit Portfolio Notes have a different underlying portfolio and different strategy, and such are suited to a different part of an investor's portfolio or to different type of investors. While MA1 is trying to capture the alpha across the private credit market, the notes have a narrower set of portfolio guidelines and are designed to be a core fixed income alternative.

The notes provide exposure to a $2.7 billion seasoned and diversified portfolio of local and global private credit investments across asset backed lending and direct corporate lending.

What factors should advisers take into account when evaluating private credit investments?

Advisers should look for managers with real ‘skin in the game’ invested in the underlying strategies in which a LIT or note invests. 

Beyond that, ensuring the manager has robust governance, valuation and risk management procedures in place is important. There should also be a commitment to disclosure, transparency and good investor engagement.

LITs provide a listed access point to the benefit of private lending. However, daily trading also means that price and fundamental net asset value can diverge. It’s worth evaluating whether a LIT has mechanisms in place to help manage the price-to-NAV dynamic – such as the option for quarterly off-market buy-backs, on-market buybacks or other levers such as the ability for other managed funds to buy units of the LIT.

What's your response to continued scrutiny of private credit managers?

We welcome the regulator’s review into the sector and the development of robust industry standards in areas like disclosure, transparency, valuation and governance.

Private credit can mean lots of things. The part of private credit we are focused on is finding areas where banks are not the efficient lenders – which could be due to prudential regulation, market structural changes, technology, organisational streamlining, or borrower preferences. In these verticals we can provide lending solutions to the real world economy. The loans we focus on aren’t new. It’s just lending.

Done right, private credit should have secured, asset-backed or otherwise defensive characteristics. It should be a fixed income alternative.

The important thing for investors is knowing what they are invested in. 

The 20-page MA1 investor report for the September quarter includes an extensive range of statistics about what is in the portfolio and how they are performing, including loan-by-loan disclosure of the underlying assets. We supplement that type of disclosure with quarterly webinars (including Q&A), monthly investor reporting, and publishing a range of material about our process. Investor engagement is a big theme for us.

How often do borrowers in your portfolio default, and how do you deal with it?

We had 224 loans in the underlying portfolio of MA1 at the September quarter end. Since inception of our private credit strategies a decade ago, we’ve done hundreds more. 

While we try to ‘avoid losers, not pick winners’, we can’t get everything right. Sometimes the world changes, low probability events happen or things just don’t go our way. This is why workouts capability matters.

Actual defaults have been pretty low. However, we are proactive in ‘working out’ our positions when we need to, in order to minimise our exposure to principal capital loss. Right now, we are rolling up our sleeves on a few loans, six of which are real estate loans and two are in our global specialty credit strategy. That’s under 4% of the overall portfolio and we believe the positions are well collateralised, meaning material principal capital loss is expected to be unlikely¹.

Since inception, our cumulative principal capital loss experience for the flagship strategies underpinning MA1 is 3 basis points. That’s 0.03%. At such a low level, it obviously has not impacted our ability to meet our target returns across the flagship strategies.

Is all the capital in MA1 and the MA Credit Portfolio Notes allocated to borrowers – or are you struggling to find suitable borrowers in the current environment?

This is why investing in proprietary origination matters. In the September 2025 quarter alone we deployed $880 million in the underlying funds of MA1. On a year-to-date basis, that figure is now over $2.6 billion.

While we only execute between 5%-10% of the deal flow opportunities we see, our origination ecosystem is a significant advantage in being able to deploy capital.

¹ Past performance is not a reliable indicator of future performance. There is no guarantee that capital loss levels will remain low in the future. Investing involves risk, including the loss of capital. 

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Disclosure / Disclaimer

This information has been prepared by MA Investment Management Pty Ltd ACN 621 552 896 AFS Representative Numbers 427515 & 335783 for general purposes only. The information does not take into account your individual objectives, financial situation, needs or tax circumstances. The information contained herein does not constitute and should not be construed as investment advice, or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. You must consider your own financial situation, needs and objectives before acting on the information. Past performance is not a reliable indicator of future performance. Investing involves risk, including the loss of capital.

Equity Trustees Limited ABN 46 004 031 298 AFSL 240975 is the responsible entity for the MA Credit Income Trust ARSN 681 002 531 (MA1). You should obtain a copy of the Product Disclosure Statement and Target Market Determination for MA1 available on mafinancial.com/invest and consider consulting with a financial adviser before making any investment decision. An investment in MA1 involves risk. Past performance is not a reliable indicator of future performance. Neither MA Investment Management Pty Ltd, Equity Trustees nor any of its related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.