Reliable income without the volatility of the stock market
This report is sponsored by TermPlus. It was independently researched and written.
Reliable income, healthy returns and a path away from sharemarket volatility. Global private credit can tick plenty of boxes.
While millions of mortgage holders celebrate rate cuts, plenty more Australians are feeling the pinch of lower returns on deposits.
Ironically, it comes at a time when household savings are hitting new highs.
According to bank regulator the Australian Prudential Regulation Authority (APRA), household deposits totalled $1.64 trillion in July 2025, up from $1.60 trillion a month earlier.
As interest rates trend lower, many Australians are questioning how best to position their savings. Traditional deposit-style products provide stability, but often at levels that may not keep pace with long-term needs.
On the other hand, the share market can feel too volatile for those seeking dependable income. For investors caught between these two extremes, alternatives like TermPlus offer a way to allocate savings into a vehicle designed to generate reliable, monthly income without tying outcomes to the ups and downs of equity markets.
A rapidly growing asset class
'Private credit' refers to any form of non-bank lending.
Helen Baker, a licenced financial adviser and author of Money for Life explains, "Many people, developers and businesses are looking for an alternative source to the bank" and this is driving demand for private credit.
Here in Australia, the private credit market is relatively small as banks tend to dominate the lending market, and where private credit does exist in the Australian market, it is often concentrated to certain sectors like property.
That's not the case internationally.
In the US and Europe, private credit is a major source of lending particularly to mid-market companies. While banks make up 90% of the lending market in Australia, in the US, banks make up just 16% the market.
A report by McKinsey notes that in the US, an additional $US5-6 trillion worth of loans could shift to the private credit market over the next decade.
This growth is creating valuable opportunities for investors - that's because non-banks and private credit managers rely on investor capital, rather than customer deposits, to fund private credit loans.
New opportunities for Australian investors
Dean Weinbren is managing executive of TermPlus, part of the ASX-listed Pengana Capital Group. He explains that global private credit has traditionally been popular among large institutional investors seeking healthy, regular income returns, but has long been out of reach for everyday Australian investors.
In fact, if you're with a big super fund, chances are you already have some exposure to global private credit.
In an exciting breakthrough for Australian investors, global private credit is becoming available to retail investors.
Products such as TermPlus, for example, offer online term accounts that deliver attractive and reliable monthly income to account holders, and can be opened with as little as $2000.
Four key benefits of global private credit
Global private credit offers four main points of appeal to retail investors:
1. Regular, passive income
As an asset class, private credit allows investors to experience some of the benefits that major global lenders enjoy - notably, earning regular, steady and passive income generated by the underlying contractual loans.
2. Attractive returns
Dean Weinbren says global private credit securities are "mainly floating rate".
This means the returns are set as a fixed percentage above the Reserve Bank of Australia (RBA) cash rate.
In addition, Weinbren points out that investors can earn an "illiquidity premium". The longer the investment timeframe you commit to, the higher the targeted return.
"TermPlus calculates rates targeted for account holders as a fixed margin above the RBA cash rate in order to provide reliable returns, that are unaffected by inflation.
As a guide, a one-year term account with TermPlus has a target rate of the RBA cash rate (3.6% at the time of publishing) plus a fixed 3% margin on top of that.
A two-year term will have a fixed margin of 3.65%, and a five-year term will pay a fixed margin of 4.15% above the RBA cash rate, with returns able to be paid directly into your bank account every month, or reinvested for compounding over the duration of your term.
3. Returns not linked to equity markets
While shares can also be a source of healthy, regular dividend income, there is a catch.
Helen Baker explains, "Share prices will move - and do move constantly - and there is risk of volatility." This being the case, she adds, "It is important that any investment aligns strategically with your goals and needs for capital and income, so you don't have to sell in a bad time."
For some investors, this need to plan ahead for equity market volatility can be a major deterrent. For others, the potential for volatility will simply be at odds with their personal risk appetite.
As Weinbren points out, "Global private credit has a track record of delivering attractive returns with lower volatility than listed investments."
4. Portfolio diversification
As part of the fixed interest class of investments, global private credit brings much-needed diversification to an investor's portfolio.
The added appeal of global private credit is that investors gain even more diversification through assets located across different geographic markets and sectors.
"The global aspect provides important diversification for Australian investors with the opportunity to spread risk via investments into a totally new, and established sector of top-tier global private credit securities," says Dean Weinbren.
"TermPlus is an easy way to diversify into these global private credit markets for income returns."
Investing in global private credit - what to know
An investment in global private credit is usually made via a managed fund structure. Unlike bank deposits, your money is not guaranteed.
As Helen Baker notes, "Private credit is another option to service the market as well as being an investment for those who wish to take extra risk."
This extra risk above cash accounts makes it important to choose an investment manager with care.
"Investors can benefit from doing their homework," says Weinbren, who adds that risk and return profiles can vary dramatically across the private credit sector. Investors should avoid "comparing apples with oranges" in the local and global markets.
He suggests looking at the investment manager's track record - in particular, whether it spans several cycles, including down markets.
"Investors should also be mindful of what protections may be available," notes Weinbren. "TermPlus offers investors three layers of protection, underpinned by a support account co-investment alongside account holders, made by Pengana Capital Group."
More broadly, investors should be mindful of the investment's underlying diversification.
Weinbren says, "There is a big difference between Australian private credit and global private credit, regarding risk exposure and returns potential.
"Global private credit offers much broader and deeper investment opportunities, across various sectors and businesses."
The next must-have for income investors?
While global private credit is currently less familiar to Australian investors, in time Weinbren believes it will track a similar path to global equities.
Weinbren says it wouldn't be surprising to see global private credit become a staple must-have for all income investors.
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