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Private credit boom not a systemic risk, MaxCap says as it wins $1bn of fresh capital

By Ben Wilmot

Real estate funds manager MaxCap Group has lifted its funds management empire by $1bn and hired a former National Australia Bank executive as its chief financial officer, as it rides the $200bn private credit boom.

The company, one of the leaders in the sector that has swept investment markets as major banks pulled back from commercial property lending, says that while current conditions are tough for residential developers, it expects that construction will surge in coming years.

The company, backed by US funds heavyweight Apollo Global Management, is well positioned to ride this tide, as it now runs more than $8bn of funds after three major clients topped up their commitments and it won the backing of a sovereign fund.

MaxCap is one of the institutional-grade players that have made the sector a darling of global pension funds and, increasingly, local superannuation investors.

Executive chairman Wayne Lasky says he and other managers would welcome more transparency as the sector grows, but played down the prospect of systemic risk arising from their lending in commercial real estate.

“I don’t think there is material systemic risk. There’s $2 trillion in global private credit and $200bn in Australia; that’s versus $300 trillion of combined government, corporate and consumer debts,” Mr Lasky said.

“I’d like to believe that there will be systemic risk in the future, because there’s going to be a lot of growth in this area. It’s certainly not today.”

But he said additional transparency was “absolutely warranted” and MaxCap and other institutional-grade investment managers would welcome it.

MaxCap has appointed Kylie Robb – who was formerly the executive general manager and chief financial officer of business and private banking at NAB – as the firm’s chief financial officer. Mr Lasky cited her breadth of commercial and technical expertise from more than 20 years in financial services, including in investment banking at Goldman Sachs in New York and Sydney, group treasury at Commonwealth Bank, and finance at NAB.

Ms Robb said MaxCap was well known for its market-leading position in real estate private credit and equity solutions and was well positioned for future growth.

Image: Kylie Robb

Apollo head of Asia Pacific, Matthew Michelini, said MaxCap was a key component of its commercial real estate strategy in Australia, with the group acting as a partner and capital provider.

Mr Lasky pointed to the boost to MaxCap’s operating platform, risk management and governance from the hire, noting the increasing sophistication across the broader non-bank private credit industry. He also cited the increased support from a domestic superannuation fund and two European pension funds, as well as the fresh capital from a new international sovereign fund.

“We’re getting really strong support both domestically and offshore, and that support is coming from the superannuation industry, from pension funds, sovereign funds, insurers, and increasingly it’s also coming from the wealth management industry,” he said.

MaxCap’s flagship investment trust has received more than $500m in the last 12 months. Apollo has committed $1bn of capital, and more recently put $100m into the firm’s last two deals.

Despite the inflows, Mr Lasky said there was still not enough alternate capital from pension funds to ensure the transmission of credit to commercial real estate assets and sponsors. Locally, private credit is about 15 per cent of commercial real estate lending, whereas it is about 50 per cent in North America and Europe.

“There is a tremendous amount of growth ahead of the industry,” Mr Lasky said, citing his firm’s interest in the living and industrial property sectors.

“There is definitely a global search on to find alternate asset classes that are able to deliver excess returns for the risks.”

Mr Lasky played down the prospect of the market being swamped by too much competition as new players entered. He said both bank and non-bank lenders were required to provide funding to commercial real estate

The challenge for investors was to ensure that they were doing due diligence and working with experienced managers. Historically, some players came into markets but did not have the necessary operating platforms, he said.

“I wouldn’t like to see that because that can tarnish the industry, more broadly,” he said.

But MaxCap is focused on the potential for growth. Mr Lasky said that with a less restrictive central bank in 2025, a major residential construction boom was highly likely as developers were now seeking finance.