Rethinking the 60/40 Portfolio: Why Private Credit Is on the Rise

Rethinking the 60/40 Portfolio: Why Private Credit Is on the Rise
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It’s been a turbulent time in markets. The kind of volatility we’ve seen recently in equities and bonds, reminiscent of the COVID-19 shock which has prompted many investors to revisit the foundations of their portfolio strategy. One area attracting renewed attention is private credit.

Once considered a specialist asset class, private credit is steadily moving into the mainstream. With its combination of strong income potential, diversification benefits, and lower correlation to public markets, it’s starting to take its place alongside more traditional holdings. But as always, growth brings complexity, and scrutiny.
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Private credit is no longer a quiet corner of the market. According to Moody’s, global assets in the sector are expected to reach US$3 trillion by 2028. A growing number of institutional investors are already increasing their exposure. As a result, private commercial real estate lending has expanded rapidly, growing by around 25% each year over the past four years.
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One of the main drivers is income. Private credit can offer annualised yields in the 8–10% range, well above the dividend income available from equities, which tends to sit around 4–5%. That’s a compelling proposition for investors looking to generate stable returns in a higher-rate environment.
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It’s an active investment that requires a clear understanding of the underlying risks.

As the sector matures, it’s also coming under increased regulatory focus. In Australia, ASIC has highlighted several areas of concern, particularly around transparency, reporting consistency, and liquidity. There are also questions being raised about the governance and leverage structures used in some private credit funds. These are not just operational matters; if left unaddressed, they could lead to a loss of investor confidence and, in a worst-case scenario, forced asset sales.
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This feels like a turning point for the industry. Private credit is playing a larger role in diversified portfolios, particularly in a world where the traditional 60/40 model no longer feels sufficient. But with that greater role comes greater responsibility.
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For the sector to maintain trust and continue to grow sustainably, stronger governance, better transparency, clearer and enforceable disclosure standards, and more robust investor education are essential. Private credit doesn’t need to overpromise. It just needs to be understood for what it is: a valuable part of a well-constructed portfolio, with its own set of opportunities and risks. There’s real value to offer, but to avoid being seen as just another passing trend, the industry needs to meet the moment with trust and credibility.
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Ultimately, trust will determine the longevity of this asset class. And trust begins with transparency.
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Tim Stoyles
Managing Director
Sydney Wyde
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Reference article: https://www.afr.com/markets/debt-markets/private-credit-needs-to-lift-its-game-to-be-taken-seriously-20250417-p5lskx

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