Major Australian superannuation funds are expressing concern over emerging vulnerabilities in the country’s $200 billion private credit market after the collapse of the Bathla Group, a property developer that entered administration last week with around $3.6 billion owed to creditors. The fallout has highlighted risks associated with private lending, particularly in the property sector, and prompted some funds to reconsider their exposure to this segment.
Bathla Group’s financial distress, which required a $20 million emergency injection from lenders to avoid liquidation, has led to significant freezes in funds linked to the developer. Property fund manager Centuria Capital, which owns Centuria Bass—one of the private credit businesses impacted—recently suspended redemptions on $670 million across two of its funds with exposure to Bathla.
Superannuation giant Cbus, which has connections to Centuria Bass, has taken a cautious stance. Leigh Gavin, Cbus’s chief investment officer, said the fund maintains a selective approach to private credit and is prepared to redirect capital to other asset classes or international opportunities if domestic loans do not meet their return and risk criteria. He emphasized that Cbus does not engage in the highly competitive segment targeting private wealth and SMSF investors, where lending standards have loosened as funds compete for deals.
Similarly, UniSuper and Colonial First State (CFS) are shifting focus toward offshore private credit markets, particularly in the US and Europe, favoring established companies with strong cash flows and institutional quality. Jonathan Armitage, CFS’s chief investment officer, cited the greater diversification, resilience, and scale of offshore markets compared to Australia's concentrated property-focused environment.
Hostplus chief executive David Elia echoed these concerns, describing private credit as viable but highlighting the risks associated with poorly underwritten loans, particularly under rising interest rates. Elia noted that the rapid growth in Australian private credit has yet to face a comprehensive test but warned that tighter monetary conditions will likely increase default rates, especially among highly leveraged and property-related borrowers.
The heightened caution comes amid inflation data suggesting imminent interest rate hikes, which would further strain private credit issuers. This scenario coincides with a housing market slowdown following recent federal tax changes, creating additional challenges for property developers and their lenders.
The corporate regulator, the Australian Securities and Investments Commission (ASIC), underscored the significance of Bathla’s failure. ASIC chair Sarah Court described it as “the first real test for private credit” in Australia, pointing to ongoing concerns about the sector’s vulnerabilities. She noted that while the situation is still developing, the Bathla case reveals cracks that had long been anticipated by regulators and market observers.
Other major super funds, including Australian Super and REST Industry Super, declined to comment on their exposure to affected lenders, though it is known that REST has allocated tens of millions of dollars to investment manager PAG, another Bathla creditor.
The Bathla collapse and industry caution signal a turning point for private credit in Australia, pushing traditional investors to reevaluate risk, underwriting standards, and the sector’s long-term viability amid shifting economic conditions.