Betashares’ private credit sector expansion faces hurdle as investors rush to sell out of US operated fund

Betashares’ expansion into the private credit sector faces headwinds as global investors rush to sell out of a fund operated by its US investment partner Cliffwater.

The homegrown asset manager that amassed $75 billion in funds under management by pioneering low-fee exchange traded funds (ETFs) launched its first private credit fund offering in August 2025, via its partnership with Cliffwater.

But on Wednesday, Cliffwater warned that investors in its flagship Cliffwater Corporate Lending Fund requested to sell a total of 17 per cent ‌of the fund’s shares in the second quarter. Cliffwater also said it would cap total redemptions, or sales, to 5 per cent of the fund’s value in any quarter.

Worries about the quality of loans, valuations, and rising bad debts linked to higher interest rates have troubled the global private credit sector since early 2025, as some wealthy investors sell out of holdings.

The Betashares Cliffwater Private Credit Fund acts as a relatively minor feeder fund into the parent Cliffwater Corporate Lending Fund Fund, worth around $US31 billion ($43.4 billion).

Betashares said it could not respond to comment within time as to whether its wholesale Australian investors into the feeder fund had also applied to sell unusually high amounts of units.

Private equity group TA Associates is an investor in both Betashares and Cliffwater.

Private market sell-off steepens on Wall St

The selling across the global private credit sector accelerated overnight on Wednesday as shares in three of Wall Street’s listed giants slumped.

Near the closing bell, shares in $US130 billion private markets giant Blackstone tumbled 5.2 per cent, KKR sunk 4.7 per cent, and private credit specialist Ares Management lost 4.6 per cent.

The latest wobbles came after European private credit seller, Partners Group, moved to to impose limits on investor withdrawals from one of its funds on Wednesday.

The Swiss investment firm has a significant sales and distribution team in Australia, with its website boasting local retail and institutional investors have invested $15 billion into its private funds.

The worsening sentiment around private market funds and the Middle East conflict pushed the S&P500 fell 0.6 per cent lower on Wednesday. Australian share futures pointed to falls at the open on Thursday.

Private credit risks back in focus

Betashares’ Cliffwater Private Credit Fund received a ‘recommended’ rating from influential financial advice consultancy Lonsec, soon after its August 2025 launch.

The consultancy did not respond to a request for comment on whether the rating will be placed under review, at the time of publication.

Betashares’ Cliffwater Fund advertises income returns of 8 to 9 per cent per year. It’s only available to institutional investors, or those using a financial adviser on an investment platform.

It charges management fees and costs of 1.75 per cent per year, versus the typically cheaper fees Betashares charges to invest in its popular ETFs that own public equities.

The fund documents recommend investors hold units for a minimum of five years. This is partly because the fund’s underlying assets in the form of loans are not easy to instantly sell for cash, unlike shares, traded daily, on an exchange.

“Investors must be comfortable with the risks associated with private credit, including exposure to an asset class that is inherently illiquid and limited ability for investors to withdraw their investment,” Betashares’ website warns.

In total the fund has exposure to over 3,900 loans across varied industries including IT, healthcare, industrials and financials. The income from those loans is returned to the funds’ investors via quarterly dividends.

Changing investment landscape

In Australia, the financial services regulator ASIC warned last November that its review into the Australian private credit sector gave it concern around standards of investment reporting, valuation practices, fee disclosures, and related party transactions.

ASIC also warned some investors underestimated the chances of capital losses in private credit and mistakenly believed the income paid was not subject to risk.

Australia’s private credit sector typically lends to real estate development and construction businesses, and is not linked to the BetaShares’ Cliffwater Fund that’s managed in the US.

Major Australian private credit player and non-bank lender to property developers, Metrics Credit Partners, has been the subject of regular scrutiny by the business media.

Betashares has itself pushed into business media with the acquisition of multi-media investment content producer Equity Mates for a reported $8.5 million valuation. The acquisition helps Betashares market to investors directly, without needing to pay to advertise in traditional media.

Other discount brokerages such as Stake and Superhero have also invested in producing their own investment content to reach potential customers directly.