The governance structure of a private credit fund is, in many respects, as important as its investment strategy. Strong returns depend on disciplined credit selection — but the integrity of the structure within which capital is held, managed, and returned to investors is what underpins confidence in the fund over time.
One of the most meaningful structural features an investor can look for is the presence of an independent, third-party trustee. In a well-governed private credit fund, the trustee acts as legal custodian of the fund’s assets and an independent overseer of its operations — separate from, and not beholden to, the fund manager making investment decisions.
This article explains what a third-party trustee does, why the distinction between a third-party and a related-party trustee matters, and how the trustee structure protects investor interests across the key areas of governance, asset safety, compliance, transparency, and operational continuity.
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Third-Party vs Related-Party Trustees
Before examining the role of a trustee in detail, it is worth drawing a clear distinction. A third-party trustee is an entity that is entirely independent of the fund manager — it has no ownership relationship, shared personnel, or commercial affiliation with the manager. A related-party trustee, by contrast, is connected to the manager in some way, whether through common ownership, shared directors, or affiliated corporate structures.
The practical significance of this distinction is significant. The value of a trustee lies in the separation of duties it creates between the entity managing investments and the entity holding and overseeing the assets on behalf of investors. Where that separation does not genuinely exist — because the trustee and the manager are related parties — the independence that investors are relying upon may be more nominal than real, and the risk of conflicts of interest is materially elevated.
For this reason, the focus of this article is on third-party trustees, where the structural separation is genuine and the fiduciary obligations of the trustee operate independently of the fund manager’s commercial interests.
Governance and Independent Oversight
Effective governance in a private credit fund requires more than clear policies and procedures — it requires an independent oversight framework with the authority and incentive to enforce them. The fund manager is responsible for sourcing loans, conducting credit assessment, and managing the investment portfolio. These are the right responsibilities for the manager. But without independent oversight, the structure relies heavily on the manager policing itself, which is an inherently weak governance design.
A third-party trustee introduces genuine accountability into that structure. Operating independently of the fund manager, the trustee holds a legally binding fiduciary obligation to act in the best interests of investors. It reviews how the fund is managed, monitors adherence to the trust deed and investment mandate, and has the authority to intervene if the fund manager acts outside those boundaries.
Critically, the bank accounts and assets of the fund are controlled by the trustee — not the fund manager. This is not a minor procedural detail. It means that a fund manager employee cannot unilaterally access or redirect fund assets, regardless of their seniority or intent. The physical separation of asset control is one of the most important protections a trustee structure provides.
For investors, this separation means the organisation making investment decisions is required to report to, and answer to, a third party whose mandate is investor protection — not investment performance.
Safeguarding Investor Assets
One of the trustee’s most fundamental responsibilities is holding legal title to the fund’s assets on behalf of investors. While the fund manager executes the investment strategy, the assets themselves — the loan receivables, security interests, and cash — are held within the trust structure, entirely separate from the fund manager’s own balance sheet and operational accounts.
This separation has direct and material consequences for investor protection. Investor capital is not commingled with the manager’s corporate finances. It cannot be accessed to fund the manager’s operational costs, satisfy the manager’s creditors, or be redirected for any purpose inconsistent with the trust deed. Even if the fund manager encounters financial difficulty or becomes operationally unviable, the underlying assets remain held within the trust structure for the benefit of investors — they do not form part of the manager’s insolvency estate.
From an investor’s perspective, this structural separation means that exposure to the fund manager’s operational or financial risks is fundamentally limited. The investment is in the trust’s assets, not in the fund manager as a corporate entity.
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Regulatory Compliance
Australia’s financial regulatory framework is robust, and private credit funds operating within it are subject to meaningful compliance obligations. Trustees play an important role in ensuring that funds meet those obligations consistently.
In practice, this means the trustee monitors adherence to the fund’s governing documents, verifies that investment activities remain within the scope of the disclosed strategy, and confirms that investor protections are maintained in accordance with applicable law and ASIC’s regulatory expectations. Where the fund manager’s conduct falls short of these standards, the trustee has both the obligation and the authority to act.
For investors evaluating private credit opportunities, the presence of an independent trustee signals that the fund operates within a structured compliance framework — one where regulatory obligations are monitored by a party whose interests are aligned with investors, not with the manager’s commercial outcomes.
Transparency and Reporting Integrity
Private credit investments are not publicly traded, and investors therefore rely on accurate, timely reporting to understand how their capital is being deployed and how the underlying loans are performing. The credibility of that reporting matters enormously — and the presence of a third-party trustee meaningfully reinforces it.
Trustees support reporting integrity by verifying that financial statements, loan allocations, and investor disclosures are consistent with the fund’s actual operations and governing documents. This independent verification is qualitatively different from a fund manager reporting on its own performance. When a third party with fiduciary obligations to investors has reviewed the information and confirmed its accuracy, investors can place greater weight on it.
In an asset class where transparency is already a key differentiator between managers, independent trustee oversight adds a further layer of credibility to the reporting process — one that is structural rather than discretionary.
Operational Continuity and Investor Protection
A dimension of trustee value that is sometimes overlooked is the role it plays in protecting investors if the fund manager itself encounters difficulties. If a fund manager faces operational disruption, financial stress, or becomes unable to continue managing the fund, the trustee has the authority and legal standing to act in investors’ interests without delay.
In practice, this may involve appointing a replacement fund manager, engaging a third-party administrator to manage the loan portfolio, or placing the fund into an orderly run-off — whichever course of action best serves investor interests in the circumstances. Because the trustee holds the assets and controls the fund’s accounts, this transition can occur without investor capital being at risk during the process.
The trustee also ensures that investor rights and entitlements under the trust deed are upheld consistently — including timely redemption payments and equal treatment of all investors — independent of any commercial pressures the fund manager may be experiencing.
Conclusion
The investment strategy of a private credit fund determines its return potential. The governance structure determines whether investors can trust that the strategy will be executed as described, that their capital will be protected, and that their interests will be prioritised — not just when conditions are favourable, but when they are not.
A third-party trustee is one of the most important structural features an investor can look for when evaluating a private credit fund. It provides independent oversight of the fund manager, holds legal title to assets separately from the manager’s balance sheet, supports regulatory compliance, reinforces reporting credibility, and provides a mechanism for protecting investor interests if the manager encounters difficulties.
For Australian wholesale investors considering private credit, the presence of a genuinely independent trustee is not a procedural formality — it is a meaningful indicator of how seriously a fund manager takes its obligations to the people whose capital it is managing.
Speak with Rixon Capital
Rixon Capital operates with an independent third-party trustee structure, ensuring that investor assets are held separately from the manager’s balance sheet and that fund governance meets the standards that wholesale investors should expect. Our approach is grounded in disciplined credit, transparent reporting, and structures designed to protect capital.
Contact us to arrange a confidential discussion about your investment objectives.
This article is for informational purposes only and does not constitute financial product advice. It is intended for wholesale investors as defined under the Corporations Act 2001 (Cth). Past performance is not a reliable indicator of future performance. Investors should consider their own objectives, financial situation, and needs before making any investment decision.
