Australian and New Zealand Private Debt Market Quarterly Review

Revolution Asset Management 

January 2026

(8-Minute Read)

Market overview

The year 2025 ended with a continued constructive tone across all investment asset classes, with a 'risk-on' sentiment that was consistent for much of the year. Volatility was largely contained, punctuated only by a handful of brief dislocations - the most notable occurring during the Liberation Day tariff period. The broad-based rally has continued with record highs being tested in equities, precious metals, credit spreads and real estate valuations through the back end of 2025.

In interest rate markets, there seems to be an emerging disconnect between the trajectory of the US versus other developed markets. In the US, inflation has yet to pick up and the economy continues to grapple with cost-of-living pressures. By contrast, the UK, Canada and Australia have all witnessed a significant uptick in inflation. This translates into potential interest rate cuts in the US (aided by US President Trump actively lobbying the US Fed) compared to other developed world central banks commencing or looking to hike interest rates to tame inflationary pressures. This backdrop has led to the weakening of the US dollar and the so-called 'de-dollarisation', as leading market commentators increasingly question the durability of the US dollar's status as the world's reserve currency.

Closer to home, the RBA at the conclusion of 2025 signalled to the market that interest rate cuts previously factored in for 2026 were off the table, following a surprisingly high inflation reading of 3.8% in December. In fact, many economists were forced to backflip from their previous vocal rate cut calls to then predict multiple interest rate hikes this year. In the most recent January CPI monthly reading, inflation has moderated to 3.4% which has tempered rate hike expectations, with the market now predicting an almost certain 25 basis points (bps) rate hike by August 2026. The RBA ultimately has time to assess whether inflation will come into its target 2-3% band over the next few months, before having to make any decision to adjust the current cash rate of 3.6%.

From Private Equity to Private Credit: A Market Transformation

As we enter the new year, it is worth reviewing the continued development of the private credit market globally. From humble beginnings, there has been nothing short of an explosion in private credit. According to Preqin, the private credit market has risen from US$250 billion in 2007 to a staggering US$2.5 trillion, globally. This phenomenon is best illustrated by the largest private equity firms, many of which now operate substantial private credit operations, often with more assets under management (AUM) in credit than in private equity. As an example, Apollo Global Management has a significantly larger private credit AUM of US$690 billion compared to its private equity AUM of US$150 billion. Ares Management, Blackstone, Brookfield, and KKR also share this trait, having substantial private credit businesses that rival or exceed their private equity AUM, as shown in the chart below.

These once celebrated and successful private equity managers have effectively morphed into major private credit firms. The principal reason for this has been the attraction of a more conservative asset class, where scale allows these firms to underwrite and hold whole loans that would have previously been financed by banks or the broadly-syndicated loan/CLO markets.

The Largest Private Equity Firms Have Become Major Private Credit Players

Source: Gain.pro and public filings. Analysis excludes infrastructure and real estate funds but includes secondaries.

As the private credit market continues to mature, it is fair to say that there has been a permanent shift away from banks being traditional lenders to companies �' from middle market size all the way through to the very largest privately owned corporates. At the same time, there has been an absence of a meaningful recession (negative COVID-related impacts were short-lived thanks to co-ordinated fiscal and monetary policy stimulus) which has supported consistently robust returns in private credit, with little dispersion between top and bottom quartile managers. This has fuelled the growth in both fundraising and deployment by the large as well as smaller credit managers in the sector.

As Private Credit Grows, Loan Protections Erode

While the overall trajectory of the private credit market has been positive, there have been some unwelcome signs that there may be cracks emerging. The rapid pace of fundraising in a prolonged, benign, 'risk-on' environment has created mounting pressure to deploy capital. This has led to weakening terms and conditions of new private credit loans, as demonstrated by the increasing prevalence of covenant-lite loans in both broadly syndicated loans and private credit markets. Since 2011, the share of covenant-lite loans has risen dramatically. In the US private credit market, they accounted for around 15% of broadly syndicated loans in 2011, climbing to over 90% by 2023. Covenant-lite loans offer fewer financial restrictions and protective covenants for lenders than typical loan agreements, reducing safeguards in the event of borrower stress. In addition, over the past two years, covenant-lite issuance has become commonplace, especially in larger deals exceeding US$500 million.

Furthermore, high-profile defaulted and fraudulent loans to companies such as First Brands and Tricolor have highlighted a lack of thorough due diligence and weakened credit underwriting standards that has led to multi-billion-dollar losses to private credit lenders. These cases provide additional evidence of the pressures to deploy capital and the intensifying competition within the market.

While these trends are US specific, similar dynamics are emerging in Australia. Many larger private credit funds have grown comfortable with weaker terms, conditions, and documentation, drawing on their experience in international markets. This has intensified competition for larger leveraged buy-out loans, often with terms that benefit borrowers at the expense of traditional lender protections.

Another feature which we have witnessed in the larger international funds is their more recent adoption of asset backed securities (ABS) or asset backed finance as a complement to their leveraged finance focus. This is principally due to ABS transactions having a much more prescriptive treatment of cashflows and stringent performance triggers that are embedded in comprehensive documentation as well as better margins for the risk. As such, there has been greater competition in the areas in which Revolution looks to deploy capital.

Commitment to Credit Quality and Investor Transparency

In today's environment of heightened competition and weaker loan terms, maintaining rigorous credit discipline is more critical than ever. Revolution has been able to maintain a high level of capital deployment and at the same time maintain high levels of credit quality principally due to the firms scale and target yield.

Although operating on a smaller scale than the global private credit giants with Australian operations, Revolution has established a leading position in Australia and New Zealand by being able to provide in excess of A$200 million per transaction for loans that are priced with credit margins between 400 bps and 600 bps.

In an environment where credit underwriting standards and documentation have weakened, Revolution remains focussed on thorough due diligence of each loan and maintains very strict quality standards. This discipline is evidenced by avoiding payment-in-kind (PIK) loans, cyclical exposures, lending to small or start-up counterparties, and entering into loans with very weak lender protections.

In more recent portfolio transactions, Revolution has been able to take a cornerstone lender role through shaping key terms and conditions, as well as demand superior economics more akin to underwriting fees than syndication fees.

In our last quarterly report, we discussed the findings of the two ASIC reports of the Australian private credit sector and outlined Revolution's response. The key findings of these reports �' covering areas such as treatment of upfront fees, independent portfolio valuations, avoidance of related-party transactions, and transparency on underlying loan portfolios - align closely with Revolution's existing practices. We are continually looking at ways to improve and remain committed to transparency and prompt responsiveness to ASIC's recommendations.

Business Update: Strategic Partnership, New Products and Team Growth

During the quarter, it was announced that Revolution agreed to form a strategic partnership with ColCap Financial Group (ColCap) by selling a 14% stake in the firm to ColCap. ColCap is a leading non-bank originator of Australian mortgages with over a 20-year track record in originating and servicing these loans with an exemplary track record. The nature of the strategic partnership with ColCap will allow Revolution to bring two new products to market throughout the course of 2026. We look forward to presenting these products to our investors in due course.

We are pleased to announce the addition of two new members to the Revolution team. John Price joined the firm at the end of 2025 in the newly created role of Head of Strategy and Distribution. John is a seasoned professional with over 20 years' experience in financial markets. He will be responsible for working with the Channel Capital distribution team in servicing existing clients, assist with capital raising, and contribute to the development and launch of new and innovative products in 2026 following the strategic partnership with ColCap. In addition, Christian Burrello joins as an Investment Analyst and will work closely with the investment team responsible for the senior secured corporate loans and real estate loans in the portfolio. We are proud to welcome the new members of the team in line with the firm's growth.

Portfolio and pipeline review

The Revolution Private Debt Fund II (the Master Fund) has returned 0.67% (after fees)* in December and is meeting its target return of the RBA cash rate plus 4% to 5% p.a. (net of fees and expenses) since inception.** The objective of the Master Fund is to achieve this return with low volatility and with the benefit of having security over the underlying assets.

The Master Fund has a total fund size of A$3.06 billion as at 31 December 2025. The Master Fund held a total of 57 loans as at 31 December 2025, with an average expected life of the portfolio being 1.9 years. The portfolio yield to maturity is 8.84%, with a credit spread of the portfolio above BBSW of 493 bps. The average credit rating of the portfolio is BB.

The deal pipeline in Australia and New Zealand remains robust, which should allow for continued strong deployment. In Senior Secured Corporate Loans, activity has increased in the second half of the year as was expected earlier in the year. The Asset Backed Securities market remains active. Revolution has been focused on upsizing many of its existing private warehouse investments as the size of facilities and the Fund's appetite grows in tandem while investing in new warehouses from well capitalised preferred originators. Additionally, Revolution continues to find and capitalise on attractive secondary market opportunities across sectors.

Source: Revolution Asset Management. See below for defined terms.

Revolution Private Debt Fund II (CHN3796AU)*
Performance as at 31 December 2025.

* Performance is based on month end unit prices before tax. Net performance (after fees) is calculated after management fees and operating costs. Individual Investor level taxes are not taken into account when calculating returns. This is historical performance data. It should be noted the value of an investment can rise and fall and past performance is not indicative of future performance. The comparison to the RBA Cash Rate is displayed as a reference to the target return for the Master Fund and is not intended to compare an investment in the Master Fund to a cash holding. Loans held by the Master Fund are subject to borrower default risk and as such the Master Fund is of higher risk than an investment in cash.

Portfolio characteristics as at 31 December 2025

Source: Revolution Asset Management. See below for defined terms. These 'forward-looking statements' are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed. Although we believe that the Fund's anticipated future results, performance or achievements expressed or implied by those forward-looking statements are based upon reasonable assumptions and expectations, the reader should not place undue reliance on forward-looking statements.

Funds operated by this manager:

Revolution Private Debt Fund II , Revolution Wholesale Private Debt Fund II - Class B

This material has been prepared by Alphinity Investment Management ABN 12 140 833 709 AFSL 356 895 (Alphinity). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance. Neither any particular rate of return nor capital invested are guaranteed.

Global Equity Outlook 2026: Earnings, Expansion, Excellence

Alphinity Investment Management 

January 2026

3 minutes read time

As we enter 2026, global equity markets are poised for the next phase of expansion. After a year defined by policy disruption, technological revolution, and geopolitical uncertainty, investors are rightly questioning whether the narrow leadership and momentum-driven returns of recent years can continue. Our view is that 2026 represents an evolution in market dynamics: from surviving tension to capitalising on expansion, from chasing narratives to backing earnings, and from speculative fervour to quality compounding. If 2025 was the year of "Tariffs, Tech, and Tension," we believe 2026 will be remembered as the year of "Earnings, Expansion, and Excellence.

Reflecting on 2025: Tariffs, Tech, Tension

Last year's market narrative was dominated by three powerful forces. Trump's return to the White House brought immediate focus back to trade policy, creating uncertainty for global supply chains, though corporate earnings ultimately proved resilient. AI infrastructure spending remained the dominant growth narrative, with hyperscalers committing over $200 billion in capex and creating a halo effect across the value chain from semiconductors to power infrastructure. Meanwhile, geopolitical tensions--from ongoing conflicts to monetary policy pivots--kept risk premiums elevated, yet markets demonstrated remarkable resilience with relatively shallow corrections.

Judging by the opening weeks of 2026, elements of these three T's appear determined to follow us into the new year. Investors should remember last year's lesson: even in strong years, significant volatility is inevitable. The key is maintaining discipline through the swings rather than reacting to them.

2026 Outlook: Earnings, Expansion, Excellence

EARNINGS: A Constructive Global Cycle Broadens
The global earnings cycle is exhibiting encouraging breadth and momentum after an extended period of narrow leadership. Earnings revisions are turning positive across regions, with upgrade ratios improving and the percentage of companies seeing earnings upgrades expanding well beyond the mega-cap tech cohort that dominated recent years.

Earnings sentiment (diffusion ratio) at a 4-year high with a positive inflection across major regions

Technology and Financials continue to lead earnings growth revisions, though they have recently been joined by Materials as higher commodity prices flow through to corporate results. Healthcare, Industrials, and Consumer sectors still lag but are showing signs of stabilisation. Consensus now expects the MSCI World index to deliver healthy double-digit EPS growth of approximately 14.1% in 2026 and 13.8% in 2027. Most major markets are projected to see a rebound in earnings growth over this period, with current laggards like China and Europe positioned to catch up. This broadening earnings picture supports higher equity valuations and reduces the concentration risk that has concerned many investors.

Early signs from the 4Q25 reporting season suggest the earnings trajectory remains strong, though market reactions are more subdued as elevated valuations raise the bar for positive surprises. If companies deliver the usual 4-5% beat, this will mark a fifth straight quarter of double-digit earnings growth--a streak not seen since late 2018.

Consensus expects strong earnings growth across all key regions in 2026 and 2027

We remain relatively constructive on the outlook for corporate earnings in 2026, which we expect to be supported by generally favourable macroeconomic conditions. Importantly, these supportive conditions are not dependent on a single driver but reflect expansion across multiple fronts.

EXPANSION: Multiple Tailwinds Converge

The macro backdrop appears constructive across multiple dimensions. Economic growth remains positive, inflation is under control, credit spreads are tight, and both fiscal and monetary policy provide stimulus. The AI capex cycle represents a multi-year growth driver still in early innings, with annual hyperscaler spending expected to exceed $400 billion flowing through to semiconductor manufacturers, data centre infrastructure providers, power utilities, and enterprise software companies. This sustained investment pulse operates largely independent of traditional business cycles, providing a reliable growth anchor for the technology ecosystem.

Hyperscaler capex intentions (US$bn) - On track to $500bn in 2026

Consumer fundamentals remain surprisingly robust despite increasing bifurcation. Unemployment sits near historic lows across developed markets, real wage growth persists, and household balance sheets are healthy following pandemic-era deleveraging. The emerging K-shaped pattern--with upper-income households benefiting from wealth effects while lower-income consumers face pressure--creates divergent retail dynamics but hasn't derailed aggregate spending. With consumption representing 70% of US GDP, this resilience provides a critical foundation for corporate earnings.

Mergers and acquisitions rebounded sharply in 2025 after hitting 20-year lows in 2023. The catalysts driving this resurgence, lower rates, open capital markets, improving corporate confidence, and more favourable regulation, remain firmly in place. Companies are no longer waiting on the sidelines as they pursue growth and technology capabilities through strategic transactions. Deal activity is forecasted to reach $6.8 trillion in 2026 and $7.8 trillion in 2027*, supported by private markets industry sitting on $4.2 trillion of dry powder (approximately $8 trillion of buying power with leverage), the stage is set for sustained M&A momentum. Across our portfolios, serial acquirers like Amphenol, Parker Hannifin, Motorola Solutions, and CRH continued adding value through disciplined consolidation strategies, while investment banks JPMorgan and Morgan Stanley benefit from elevated advisory and underwriting activity.

M&A is back and broadening out

EXCELLENCE: Quality's Overdue Mean Reversion

Quality as a factor has significantly underperformed over the past 18-24 months, left behind as markets chased momentum, AI narratives, and speculative growth-at-any-price stories. The "risk-on" environment favoured leverage and operational gearing over balance sheet strength, with investors willing to overlook fundamental weaknesses for revenue growth. Mega-cap tech concentration meant AI exposure mattered more than traditional quality metrics like high ROE, low debt, and stable earnings.

Sector dynamics compounded the challenge. Quality indices traditionally overweight Consumer Staples and Healthcare--both facing significant idiosyncratic headwinds--while underweighting Banks, which strongly outperformed. Elevated valuations, particularly in Europe, and speculative retail activity added further pressure. AI disruption concerns also weighed on Software, Diversified Financials, and Business Services, all typical quality portfolio constituents.

However, conditions now favour mean reversion. Relative valuations between quality and lower-quality stocks have normalized. Sector-specific headwinds are easing. Most importantly, as geopolitical and policy volatility persists, investors are increasingly valuing downside protection. Quality companies--those with sustainable competitive advantages, pricing power, and capable management teams with proven capital allocation track records--are better positioned to navigate uncertainty and deliver consistent returns. In an environment where fundamental differentiation matters again, excellence in business quality should separate winners from pretenders.

Quality as a factor had its worst year in decades during 2025

Positioning for 2026

Our portfolios are positioned to capture the broadening earnings leadership while maintaining rigorous quality standards. We combine exposure to secular growth trends--particularly AI infrastructure and healthcare innovation--with established leaders in Financials, select Industrials, and defensive Consumer franchises. The unifying theme is earnings visibility supported by competitive advantages, pricing power, and superior management teams.

AI and Technology: We maintain selective exposure across the value chain, balancing opportunity with execution risk. Our Magnificent Seven exposure include Nvidia and Microsoft for their AI leadership and supportive valuations. Beyond mega-cap tech, TSMC offers dominant semiconductor positioning with fortress balance sheet strength, Tencent combines gaming and cloud growth with exceptional cash generation, and Amphenol provides mission-critical connectivity solutions with high switching costs. We remain thoughtful about position sizes given the technology's rapid evolution, uncertain ROI timelines for hyperscalers, and disruption risks to incumbent business models.

Financials: Global banks represent our primary cyclical exposure, benefiting from sustained net interest margins, robust capital return programs, and improving loan growth. JPMorgan and Morgan Stanley provide diversified financial services leadership, while NatWest and Caixa Bank offer compelling regional banking franchises in the UK and Spain respectively.

Healthcare, Industrials, and Quality Defensives: Boston Scientific and AstraZeneca deliver healthcare exposure through innovation pipelines and R&D productivity. Caterpillar captures industrial recovery with pricing power and durable service revenue. Defensive positions in Coca Cola and L'Oreal (Consumer Staples) offer global scale and solid organic growth. Cyclicals such as CBRE (Real Estate) and CRH (Materials) provide quality characteristics and established competitive moats.

This positioning reflects our conviction that 2026 favours portfolios combining secular growth exposure with business quality--companies that can compound earnings through volatility rather than merely benefit from beta.

A diversified portfolio of earnings leaders

Conclusion

The transition from 2025's Tariffs, Tech, and Tension to 2026's Earnings, Expansion, and Excellence represents more than clever alliteration--it reflects our conviction that market leadership is evolving toward a more sustainable foundation. The broadening earnings cycle, supportive macro tailwinds, and quality's likely mean reversion create an environment where active management focused on business fundamentals should generate alpha.

The "free money" period for low-quality momentum plays appears to be ending. While volatility and policy uncertainty will undoubtedly persist, portfolios that combine exposure to secular growth trends with an emphasis on earnings certainty, balance sheet strength, and management excellence are well-positioned to deliver superior risk-adjusted returns. For investors willing to look beyond the narrow leadership that dominated recent years, 2026 offers compelling opportunities across a broadening set of quality businesses with genuine earnings power.

Funds operated by this manager:

Alphinity Australian Share Fund , Alphinity Concentrated Australian Share Fund , Alphinity Sustainable Share Fund , Alphinity Global Equity Fund , Alphinity Global Sustainable Equity Fund

This material has been prepared by Alphinity Investment Management ABN 12 140 833 709 AFSL 356 895 (Alphinity). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance. Neither any particular rate of return nor capital invested are guaranteed.