You may be aware that in September 2026, Metrics Credit Partners temporarily suspended redemptions from certain unlisted wholesale funds while it resolved valuation and audit issues. The suspension followed disagreements between Metrics and its auditor regarding asset valuations, particularly within private credit and property-related investments.
This has highlighted a risk that many investors understand in theory but often overlook in practice: liquidity risk in unlisted investments. Metrics stated that redemptions were suspended to ensure investors are treated fairly, and liquidity can be managed in an orderly manner.
Advantages of Unlisted Credit Funds
Despite the recent events, unlisted private credit remains a legitimate asset class and can play an important role in portfolios.
1. Higher Income Returns
Private credit funds have historically delivered yields well above cash and many traditional fixed-income investments.
Investors receive a premium because they lend to borrowers that cannot easily access bank funding and because they sacrifice liquidity.
Typical benefit:
- Higher distributions than bank deposits.
- Lower interest rate sensitivity than long-duration bonds.
- Often floating-rate exposure.
2. Diversification
Private credit returns are generally driven by:
- loan repayments
- business cash flows
- property project outcomes
- negotiated lending agreements
They are less dependent on daily share market movements.
This can reduce overall portfolio volatility when combined with shares and traditional fixed income.
3. Potentially Lower Volatility
Unlike listed securities, unlisted assets are not repriced every second by the market. Unit prices may therefore appear more stable.
However, investors should recognise that this does not necessarily mean the underlying assets are less risky. Sometimes the risk is simply less visible.
4. Access to Opportunities Not Available Through Banks
Private credit managers can:
- negotiate stronger loan covenants
- obtain security over assets
- charge higher margins
- participate in bespoke transactions
This may improve risk-adjusted returns when managed well.
Disadvantages of Unlisted Credit Funds
The recent Metrics situation highlights several important risks.
1. Liquidity Risk
This is the biggest issue. When you invest in an unlisted fund, your money is typically invested in:
- commercial property loans
- real estate developments
- private businesses
- infrastructure lending
These assets cannot be sold quickly.
If a large number of investors wish to withdraw simultaneously, the manager may suspend redemptions. That is effectively what has occurred with Metrics.
Investors may discover that:
- monthly liquidity is not guaranteed;
- quarterly liquidity is not guaranteed; and
- access to capital may be delayed for an unknown period.
This is often the most significant difference between listed investments and unlisted alternatives.
2. Valuation Risk
Listed shares have an observable market price every day. Private loans and private property exposures do not.
Valuations often depend upon:
- assumptions
- cash flow forecasts
- default probabilities
- recovery assumptions
The recent dispute between Metrics and its auditor has highlighted that reasonable experts may arrive at different valuations. A fund may therefore appear stable until a valuation review results in a material adjustment.
3. Transparency Risk
Many private credit funds disclose considerably less information than listed investments.
Investors may not always know:
- every underlying borrower;
- every loan exposure;
- loan-to-value ratios on every transaction; or
- emerging problems within the portfolio.
This makes manager selection extremely important.
4. Correlation During Stress Events
Many investors assume private credit is insulated from economic downturns.
In reality:
- rising interest rates;
- property market weakness;
- borrower defaults; and
- refinancing difficulties
can affect multiple loans simultaneously.
During periods of market stress, correlations can increase significantly.
5. Manager Risk
Success often depends heavily on the skill of the manager.
Questions include:
- How conservative are valuations?
- How experienced is the credit team?
- How strong are loan covenants?
- How much exposure exists to property development?
- How aligned is management with investors?
A strong manager can reduce risk, but cannot eliminate it.
The Key Lesson for Investors
The Metrics situation does not necessarily mean private credit is a bad investment. Rather, it demonstrates a principle I regularly discuss with clients: use illiquid assets only for money you genuinely do not need access to in the short to medium term. The recent Metrics redemption suspension has reminded the market that the liquidity premium is real.
Investors are attracted by the higher yields available from private credit. The trade-off for those higher returns was always reduced liquidity. The recent suspension simply makes that trade-off very visible.
My Professional View
For most high-net-worth investors and retirees, I would generally view private credit as:
- a complementary asset class;
- not a replacement for cash reserves;
- not a replacement for an emergency fund; and
- not a substitute for diversified listed investments.
The recent Metrics events reinforce the importance of maintaining:
- adequate cash reserves;
- diversified income sources;
- multiple fund managers / diversified share portfolio; and
- an appropriate allocation between liquid and illiquid investments.
In my view, the key question for investors is always capital security. If I feel an investment’s capital value may be jeopardised, I will not chase higher income returns at the expense of capital security.
Should you require further information on private credit investing, please feel free to contact Peter Quinn by submitting an enquiry or by calling us on +61 2 9580 9166.
The information in this document does not take into account your personal objectives, financial situation, or needs, so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser