You might have heard some talk about 'private credit' on the ASX in recent years. The world of private credit used to be the exclusive domain of fund managers and other investment professionals, and out of the reach of ordinary investors. However, times have changed on that front.
ASX investors now have several options to choose from if they wish to gain exposure to the world of private credit – or put simply, lending money to companies.
This kind of investing might appeal to a certain slice of the investing population. Private credit investments are governed by different rules than stock market investments. The certainty of income and lack of market volatility are aspects that some investors prioritise in their own portfolios. Not that this investing is risk-free, of course.
As with stocks, investors always have to worry about defaults and bankruptcies.
How to invest in private credit on the ASX
One option is to seek out companies that facilitate private credit themselves, and buy shares in those companies. Obviously, this method would have less appeal amongst investors who want to avoid owning stocks in the first place. But others may not mind if they are still getting the returns, albeit indirectly.
One company that has dedicated a lot of resources to private credit investments in recent years is investing house Washington H. Soul Pattinson and Co Ltd (ASX: SOL). Soul Patts happens to have just released its latest earnings report today. These covered the half-year to 31 January 2025.
This report revealed that Soul Patts' private credit portfolio, valued at $1.2 billion, now makes up 10% of the company's entire portfolio, up from 6% ($700 million) in the first half of FY2024.
Soul Patts grew this portfolio by a whopping 73.2% over the past 12 months and received a net cash flow of $94.1 million from it over the half year.
There's also an ETF for that
Investors who might prefer to access private credit investments more directly do have ASX options though. One such option is the VanEck Global Listed Private Credit ETF (ASX: LEND).
This exchange-traded fund (ETF) invests in a basket of global companies that are all direct providers of private credit. Some of LEND's current holdings include Blackstone Secured Lending Fund, Blue Owl Capital Corp, Ares Capital Corp, and Hercules Capital Inc.
This ETF was incepted back in January of 2024. Since then, it has averaged a return of 14.69% per annum. Of that 14.69%, 10.56% came from income, with the remaining 4.13% from capital growth.
LEND charges a management fee of 0.65% per annum.
