Authored by Ben Skilbeck (CEO)
“Only when the tide goes out do you discover who has been swimming naked.”
— Warren Buffett
Warren Buffett was talking about investing, but his famous observation has never felt more relevant to Australia’s private credit market.
The five years following the availability of COVID-19 vaccines in early 2021 saw markets and economic conditions move in one direction: up. Investors poured capital into private credit, new managers entered the market, and borrowers enjoyed more choice than ever before. In the race to “deploy” capital, competition among lenders intensified, pricing margins compressed and access to risk capital appeared almost limitless.
When the tide is high, almost every lender appears well positioned.
The real test comes when conditions begin to change.
The market is maturing and turning
Australia’s private credit market is entering its next phase.
A tougher economic backdrop, the emergence of non-performing loans that cannot simply be “refinanced to another lender”, reduced manager and investor risk appetite, and increased regulatory scrutiny all signal that the conversation is changing. Pushing money out the door is no longer, and should never have been, a measure of success. Increasingly, attention is turning to governance, portfolio quality, risk management and a lender’s ability to perform throughout the credit cycle.
That is a healthy development for the industry.
It also means the differences between lenders are becoming more apparent.
What the tide is revealing
Twelve months ago, brokers were often comparing lenders on pricing, leverage and speed.
Today, they are asking different questions.
Will this lender still have the appetite to support my client in three months’ time? Can they deliver on the terms they have offered? Do they have the capital and conviction to complete the transaction? Are their investors continuing to support the lender?
These questions matter because market conditions are beginning to expose meaningful differences between lenders.
Some managers have secured committed capital and continue to pursue quality opportunities. Others are finding fundraising very difficult, becoming increasingly risk averse and having to focus more attention on existing portfolios than new lending.
The market has also seen well-publicised examples of managers pausing investor redemptions as they deal with bad loans, and failing to follow through on funding indications made in term sheets. Likewise, several banks have become increasingly risk-off as credit conditions evolve.
For borrowers, the impact is becoming increasingly visible. Brokers are telling us about transactions where approval timeframes have extended, loan sizes have been reduced, commercial terms have changed late in the process, or funding has ultimately been withdrawn.
These situations reinforce an important point: not every lender enters a changing market from the same position of strength.
Why preparation matters
Anyone can lend when capital is abundant.
The true test is whether a lender can continue supporting borrowers when markets become more selective.
The strongest lenders carve their own path rather than simply reacting to changing markets. They maintain standards during times of abundance in order to be in a position to support borrowers when markets tighten.
At GCI Funds, our discipline has enabled us to successfully raise more than $250 million of committed capital across our investment strategies during the first half of calendar year 2026.
This ensures we can continue supporting quality borrowers throughout the next stage of the credit cycle.
Having committed capital and cash on hand allows us to focus on what matters most: understanding the opportunity, applying disciplined underwriting and providing certainty of execution when borrowers need it most.
Our investment philosophy does not change because market conditions change. Consistent underwriting, conservative structures and long-term relationships through the cycle are what allow us to serve borrowers during periods of uncertainty, as we have done for more than a decade.
The question every broker should ask
For brokers and borrowers, the next phase of private credit will be about more than minimising interest rates and maximising leverage.
It will be about choosing lending partners with the capital, discipline, value-add and conviction to continue supporting quality opportunities throughout the credit cycle.
Before recommending a lender, it is worth asking a simple question:
Will this lender still have the capacity and conviction to support my client if market conditions become more challenging? Will they have the flexibility to respond when it matters most?
Markets have a way of revealing what matters.
The next few years are unlikely to be defined by those who offered the cheapest pricing and highest leverage when capital was abundant. They will be defined by the lenders that can continue delivering when conditions become more demanding.
Because anyone can lend when the tide is high.
The true test is whether they can keep lending when it goes out.