In a recent ION Influencers fireside chat that demystified a hot but often misunderstood trend, Patrick Prasad William, Founder of Rixon Capital, provided a pragmatic and distinctly Australian perspective on the burgeoning world of private credit secondaries. Drawing on 15 years in M&A and credit, William offered a clear-eyed view of why local investors should be cautious of imported strategies and where the real opportunities lie in the domestic market.

The conversation cut through the hype to focus on risk-adjusted returns, regulatory realities, and the unique dynamics shaping Australia’s private credit landscape.

Here are the key topics and takeaways for investors and fund managers.

The Debt Secondary “Buzz”: A US Product in an Australian Market

William clarified that “private credit secondaries” is primarily a U.S. and European phenomenon, only hitting Australian radars in the last six months as global funds have raised capital locally.

• What It Is: A secondary fund buys existing loan positions from primary funds, often at a discount, typically targeting loans that are stressed, need more time, or have “some hairs on them.”

• The Mature Market Trap: While a legitimate strategy, William cautioned that in mature U.S./EU markets, intense competition compresses yields. Funds might offer 7-12% for taking on the additional risk of discounted, highly leveraged buyout (LBO) debt.

The Australian Advantage: Better Risk-Adjusted Returns at Home

William’s core message was a powerful call for local due diligence. He argued that Australian investors can achieve similar or better returns with fundamentally lower risk by sticking to domestic strategies.

• Comparing the Underlying Risk:

  • U.S. Debt Secondaries: Target LBO debt at 5-7x EBITDA, bought at a 5-20% discount to its already stressed value. Recovery in a default involves navigating complex foreign (e.g., Delaware) bankruptcy law.

  • Vanilla Australian Credit: Investors can access 7-12% yields from first-ranking mortgages or corporate lenders financing businesses at a conservative 2-3x EBITDA. “You’ve got the same benchmark returns… the Australian products make more sense.”

• The Regulatory Clarity Edge: William emphasized the advantage of investing within a familiar legal system. Australian lenders can clearly articulate recovery pathways, a stark contrast to the uncertainty surrounding a defaulted half-billion dollar loan in a U.S. jurisdiction.

The Future of Australian Secondaries: Niche, Domestic, and Slow to Scale

Looking ahead, William predicted a specialized and domestically focused path for the local secondary market.

• A Boutique Future: Given Australia’s market size, he doesn’t foresee global giants dominating. The handful of large-cap LBO loans in the country means the niche will likely be served by domestic boutiques.

• Specialization in Cash Flow Loans: True asset-backed loans are hard to buy at a compelling discount. Therefore, Australian secondary activity will likely focus on higher-risk, higher-leverage cash flow and corporate loans where discounts are possible.

• The Winning Moat: “First mover advantage” combined with access to the lowest cost of capital will be critical. A fund with a deep pocket of patient, yield-acceptant capital (e.g., targeting 7%) will be unbeatable in auctions.

The Broader Australian Credit Market: Scrutiny, Consolidation, and Scaling Up

William addressed the current negative press and regulatory scrutiny (from ASIC) head-on, highlighting a bifurcation in the market.

• Separating the Wheat from the Chaff: He distinguished between:

  • Property Development Funds: Under pressure due to problematic fee structures (high upfront fees) that can incentivize reckless deployment.

  • Corporate Credit Funds: Seen as robust due to higher underwriting skill barriers and alignment through annual management fees.

• The Path to Scale: William predicts inevitable consolidation. Many high-quality Australian credit managers run “subscale” funds of $100-300M. The next five years will see mergers and partnerships aiming for the $1 billion+ threshold needed to build a durable, institutional-grade “machine.”

• The Talent Crunch: Like much of the corporate lending world, Australia faces a shortage of credit talent. Scaling will rely on senior teams working efficiently and gradually building junior benches, aided by debt’s less frantic pace compared to equity.

The Rixon Roadmap: From Niche to Platform

For his own firm, William outlined a classic growth trajectory relevant to many emerging managers:

1. Anchor with a Niche “Story”: The flagship Rixon Income Fund targets a “capacity-constrained,” asset-backed niche, offering an attractive, defensible story to secure initial investor trust.

2. Expand into Adjacent Strategies: The newly launched Credit Opportunities Fund targets higher returns in a larger market, with the goal of scaling to over $1 billion.

3. Long-Term Vision: Ultimately, survival and success mean building a multi-strategy platform for scale or dominating one massive strategy.

Key Takeaways for Investors and Managers:

• For Australian Investors: Look beyond the headline yield. Scrutinize the underlying risk (leverage, jurisdiction, recovery process). High-quality domestic corporate credit often offers a superior risk-adjusted profile to imported secondary strategies.

• For New Fund Managers: Find a defensible niche, tell a compelling story, and use it as a launchpad. Long-term viability requires scaling to at least $100M, with the industry moving toward billion-dollar benchmarks.

• For the Industry: Expect consolidation, increased self-regulation via industry charters, and a focus on talent development as the Australian private credit market matures.

Key timestamps:

00:07 Introduction to the Fireside Chat
00:34 Patrick Prasad’s Background and Career Journey
01:44 The Evolution of Credit Markets in Australia
02:35 Understanding Private Credit Debt Secondaries
04:11 Future of Secondary Funds in Australia
05:08 Educating Australian Investors on Risk and Returns
10:55 Current Landscape and Outlook for Private Credit in Australia
13:50 Consolidation Trends in the Australian Private Credit Market
14:53 Future Strategies for Rickson Capital