APRA Puts Private Credit Under Closer Watch as Super Exposure Reaches 2% of Assets

Staff Writer

November 13, 2026

APRA Puts Private Credit Under Closer Watch as Super Exposure Reaches 2% of Assets — Image: Bernard Spragg / Wikimedia Commons, CC0

The Australian Prudential Regulation Authority (APRA) is increasing its supervisory focus on private credit, warning that stress in overseas markets could transmit to Australia and that the opaque nature of some exposures makes the full extent of the risk difficult to assess, according to its latest System Risk Outlook published on Thursday.

The twice-yearly report estimates that private credit accounts for around 2 per cent of superannuation funds’ total assets, a figure APRA described as a conservative estimate covering both domestic and international exposures. The report comes in the same week the Australian Securities and Investments Commission (ASIC) released its latest critical review of private credit funds.

Small market, growing links

APRA estimated Australia’s private credit market at around $250 billion, citing an external review by Alvarez & Marsal, and said this was “less than 4 per cent of the size of the banking system”. The report said the market’s small size helps contain immediate risks to financial stability, but that rapid growth had increased the importance of sound practices across the sector.

Overseas developments, it said, highlight vulnerabilities that warrant close monitoring. “Company failures and increased investor withdrawal requests have drawn attention to exposures” to sectors that AI could disrupt, such as software, APRA wrote. While overseas stress has so far been concentrated in certain borrowers and funds, the regulator said growing connections with the wider financial system could increase the consequences in future.

APRA also flagged a link to the AI investment boom, citing an OECD estimate that AI-related transactions accounted for 34 per cent of global private credit deal values in 2025, up from 9 per cent in 2024. Australian private credit is concentrated in real estate rather than technology, but APRA said Australian funds may also become exposed to AI-related developments through data centre financing.

Domestic warning signs

Closer to home, the report referred to the recent insolvency of a large property developer backed by many private credit funds, and to temporary restrictions on investor withdrawals by some funds. It noted that ASIC has found persistent weaknesses in governance, valuation, disclosure, liquidity management and other market practices.

Direct bank exposures to private credit are small and insurers’ investment exposures are relatively small but expected to increase, according to APRA. However, it said regulated institutions also have indirect exposures through off-balance sheet arrangements and broader market conditions, and that institutions with concentrated exposures may face greater risk.

Regulatory response

APRA said it has proposed stronger requirements for superannuation investment governance, with an emphasis on investment monitoring, valuations and accountability. It is also working with ASIC and other agencies through the Council of Financial Regulators to improve visibility of emerging vulnerabilities.

“Australia’s financial system remains resilient, but the risk environment is becoming less forgiving,” APRA Chair John Lonsdale said in a media release accompanying the report. Financial Standard reported that APRA’s 2027 system stress test will examine how AI-driven economic disruption or a sharp reassessment of technology valuations could affect banks, superannuation funds and insurers.

Implications for investors

APRA’s intervention adds a prudential dimension to the conduct-focused scrutiny ASIC has applied to the sector over the past year. For superannuation trustees, the emphasis on valuations and monitoring suggests private credit holdings, which are not marked to market daily, will face tighter governance expectations, particularly where unlisted assets affect unit prices and member switching.

For investors in private credit funds, the report reinforces themes that have emerged since the Bathla Group’s collapse: concentration in property lending, the reliability of valuations, and the alignment of liquidity terms with underlying assets. APRA’s comments are not a finding against any individual manager, but they signal that large institutional allocators, which provide much of the sector’s capital, are likely to ask harder questions about transparency.