MA Financial on 3 credit opportunities for FY27 and AI's $100tn buildout

According to MA Financial Group's Frank Danieli, success in the private credit sector is built on consistency, discipline and prudence. 

A great opportunity on paper can prove to be the wrong decision in reality and what's important is focusing on what you can control. 

"What we watch is the process, applied position after position, cycle after cycle," says Danieli.

Here he explains why Australia's "world-class" frameworks means asset-backed lending remains a high conviction asset class for the fund and how that is being reflected in its strategies.

He also reveals why AI is a double-edged sword for credit, the three biggest opportunities he's seeing in FY27, and why constructing a good credit portfolio is like putting together a World Cup-winning squad. 

Can you tell us about new investments made in the portfolio over the last quarter?

We funded ~$718 million across our private credit strategies in Q2, split across our three core market segments.

Asset-backed lending was the biggest contributor at ~$505 million. This was mostly private funding warehouses and wholesale facility financing across asset and business finance, auto, and RMBS/ABS.

In direct asset lending we made seven new investments at ~$212 million, predominantly Australian metro real estate in residential, land and industrial sub-asset classes.

We had a quieter quarter in direct corporate lending, though did execute two refinancings of existing positions.

We also approved a new global asset-backed loan with an existing channel partner. We continue to see good opportunities offshore in asset-based financing.

Can you tell us about divestments made in the portfolio over the last quarter?

We didn’t make any dramatic portfolio changes in Q2 2026. However, with 237 credit positions across our $7.5 billion underlying portfolios of private loans and a portfolio credit duration of just 17.8 months, we naturally have loans maturing, refinancing or repaying all the time. 

This is further supported by ~15% of AUM held in cash and available liquidity to ensure we can mobilise where we see attractive new opportunities.

Where positions came up for maturity or refinancing this quarter, we stayed disciplined on pricing for risk. We’ve been talking to investors over the last year about this theme. In credit, the return of your money is of paramount importance, but you still need to earn an acceptable return on your money.

Just because the downside is well protected and it’s likely you will be repaid on contract doesn’t mean you’ve invested capital well. 

Mispriced risk is still a mistake even when the downside looks protected.

We're still seeing pockets of the market where that pricing discipline is slipping. Yield being accepted on the comfort that a loan is senior or secured, rather than because it's genuinely adequate compensation for the risk. We stay focused on earning an excess, or at minimum adequate, return per unit of risk, rather than rolling positions just because we can.

In which areas of the market are you currently seeing the most attractive opportunities?

Asset-backed lending remains a high conviction asset class for us.

This is real world lending in traditional and specialty verticals where you get the benefit of funding not just one, but a whole portfolio of loans. It is ~66% of our flagship Credit Income strategy - accessible unlisted or via our MA Credit Income Trust (ASX: MA1).

We have a strong proprietary origination pipeline in this sector, supplemented by our highly scalable lending ecosystem. Importantly, the underlying collateral continues to perform well: weighted average 90+ day arrears in the underlying receivables sit at 1.5%, broadly in line with normal historical levels, and our credit-enhancement-to-loss coverage across those facilities remains strong at over 15x. 

That combination – granularity (1.33 million+ underlying assets as collateral) plus structural protection – is exactly why we keep leaning into this segment.

We’re seeing excellent opportunities to utilise Australia’s world-class investment frameworks for asset-based finance, reflected in some of the best performance of this asset class anywhere. In other markets, we have been more active in the US and recently executed two transactions in UK/Europe.

What's been one of your most notable performers over the quarter?

Our philosophy is about avoiding losers, not picking winners. We're in the business of credit, so our goal is consistent income with capital preservation, not chasing a standout position.

In fact, this was the theme of my Q2 investor letter: we don't build the portfolio around star picks, and we try not to grade ourselves that way either. 

A loan can look brilliant and still be the wrong decision; a well-underwritten one can still lose money to something unforeseeable. What we watch is the process, applied position after position, cycle after cycle.

The FIFA World Cup was just on and it’s a good analogy for how to think about credit. The teams that go the distance aren't the ones with the flashiest individual talent, they're the ones with structure, depth and consistency, so no single mistake sinks the campaign. The same applies in lending. 

On that basis, the “performer” I'd point to is the portfolio, not a position: our Credit Income fund suite, which is a flagship portfolio providing access to a $7.5 billion underlying portfolio across our strategies, delivered ~8.6% annualised for Q2. 

Meanwhile, our MA Priority Income Fund, with its differentiated ‘capital buffered’ structure (a 10% first loss buffer provided by MA Financial Group Entities), hit its target return for the 90th consecutive month.*

Looking ahead, where do you see the biggest opportunities for the fund over the next 12-24 months?

There are three areas in focus.

Firstly, expanding the breadth of our asset-backed lending strategies as that market keeps growing with attractive fundamentals.

Second, continuing to execute on global credit opportunities leveraging our expanded US presence.

Thirdly, staying disciplined on direct asset and corporate lending rather than chasing for yield or deployment.

We'll also seek to keep growing our listed capital access points. Investors can access both our Credit Income suite (essentially all our flagship strategies in one place via MA1) and our Priority Income fund suite (which is our capital-buffered product set, via MA2HA - the MA Credit Portfolio Notes) on the ASX. 

We want to give investors choice between unlisted and listed access points, with substantially similar underlying investments.

What are the themes and trends dominating discussions right now?

Beyond the process-over-talent theme I've already touched on, the one dominating every credit conversation at the moment is AI. 

The honest framing is that it's both an opportunity and a threat for lenders.

On the threat side, AI's disruptive effect on enterprise software and knowledge work is real, what some call the “SaaS-pocalypse.” 

That matters directly for lenders exposed to leveraged software borrowers: some US funds run technology exposure well over 20% on average, some as high as 40%, against a software market that's become genuinely disruptable. 

Our own credit portfolios sit at a fraction of that, around 3%. This is a function of our active approach to portfolio management, with highly diversified portfolios of different types of credit (~40 different credit sub-sectors in MA1, for example), rather than being a monoline manager.

But perhaps the more interesting story is the opportunity. AI is driving one of the largest capex build-outs in history. 

This could be ~$35 trillion this decade, and up to $100 trillion over the next two, across digitisation (AI, data centres, semiconductors), decarbonisation (energy transition, grid, clean tech) and deglobalisation (reshoring, defence, industrial policy).

That's an asset-heavy, infrastructure-driven wave of investment. There is a real opportunity to provide lending solutions to borrowers across this value chain.