Private Credit vs Term Deposits: NZ Wholesale Investor Guide
A structural comparison of NZ wholesale private credit funds and bank term deposits — legal structure, security, liquidity, tax and typical returns. Informational, not advice.
How this comparison was built
Side-by-side comparison
Rows sorted alphabetically. Inclusion criteria are described under “How this comparison was built” above. Every number links to its primary source document.
NZ wholesale private credit funds
| Fund / option | Indicative target / rate | Minimum | Liquidity | Legal structure | Security | Tax treatment | Source |
|---|---|---|---|---|---|---|---|
| First Mortgage Trust (FMT Select Fund) | ~7% p.a. (target, variable) | $10,000 | Monthly redemption windows | Managed Investment Scheme (PIE) | First-ranking mortgage security | PIE — tax at PIR | FMT website |
| Norfolk Mortgage Trust | ~8% p.a. (target, variable) | $5,000 | Notice redemption | Managed Investment Scheme | Property-backed lending | Non-PIE — tax at marginal rate | Norfolk website |
| Pallas PFTNZ Feeder Fund | ~7% p.a. (target) | $100,000 | 3-month redemption | Wholesale limited partnership | First mortgage, ~62.7% wtd LVR | Flow-through | Pallas IM |
| Pallas Senior Mortgage Fund | ~7.5% p.a. (target) | $100,000 | 6-month redemption | Wholesale limited partnership | First mortgage, ~67.5% wtd LVR | Flow-through | Pallas IM |
| Squirrel Monthly Income Fund | ~6.5–7% p.a. (target, variable) | $1,000 | Monthly | Managed Investment Scheme (PIE) | Property-backed P2P lending | PIE — tax at PIR | Squirrel website |
Bank term deposits
| Fund / option | Indicative target / rate | Minimum | Liquidity | Legal structure | Security | Tax treatment | Source |
|---|---|---|---|---|---|---|---|
| ANZ 12-month term deposit | ~4.8% p.a. (published retail rate) | $1,000 | Locked for term; early exit reduces rate | Bank deposit (registered bank) | Unsecured senior claim; subject to OBR | RWT / marginal tax rate | ANZ website |
| ASB 12-month term deposit | ~4.8% p.a. (published retail rate) | $10,000 | Locked for term | Bank deposit (registered bank) | Unsecured senior claim; subject to OBR | RWT / marginal tax rate | ASB website |
| BNZ 12-month term deposit | ~4.75% p.a. (published retail rate) | $2,000 | Locked for term | Bank deposit (registered bank) | Unsecured senior claim; subject to OBR | RWT / marginal tax rate | BNZ website |
| Kiwibank 12-month term deposit | ~4.9% p.a. (published retail rate) | $2,000 | Locked for term | Bank deposit (registered bank) | Unsecured senior claim; subject to OBR | RWT / marginal tax rate | Kiwibank website |
| Westpac 12-month term deposit | ~4.8% p.a. (published retail rate) | $5,000 | Locked for term | Bank deposit (registered bank) | Unsecured senior claim; subject to OBR | RWT / marginal tax rate | Westpac website |
Scenarios where each category tends to be used
Class-level category content — not personalised advice. Whether a category suits your situation depends on your own objectives and circumstances.
Private credit
- Investors comfortable with funds-under-management structures and with reading an Information Memorandum.
- Capital bases where a $100,000+ minimum does not concentrate risk materially.
- Mandates that can tolerate redemption notice periods (3–12 months depending on fund) in exchange for higher target income.
- Investors seeking first-mortgage property exposure as an income asset rather than direct property ownership.
Term deposits
- Investors prioritising predictable, contractually-fixed interest for the full term.
- Smaller balances where the OBR threshold (currently NZ$2m per bank, per accounts guarantee regime) remains protective.
- Liquidity horizons shorter than 12 months where breaking a deposit is preferable to the redemption notice on a managed fund.
- Cash-management buckets where capital preservation outweighs incremental return.
Key risks by category
Private credit
- Credit risk — borrowers in the fund can default. First-ranking mortgage security reduces but does not eliminate loss.
- Liquidity risk — redemption windows can be suspended by the manager in stress periods, locking investor capital.
- Concentration risk — many NZ private credit funds lend to a single sector (e.g. commercial property). Sector downturns affect multiple loans simultaneously.
- Manager risk — performance, valuations and loan origination quality depend on the manager; there is no bank regulator equivalent.
- Valuation risk — fund unit prices reflect manager judgement on loan quality; movements may lag actual underlying loan deterioration.
- Regulatory risk — wholesale-only products have less FMA disclosure than retail funds; investors must self-assess.
Term deposits
- Interest-rate risk — a fixed rate for 12 months means a deposit underperforms if rates rise; breaking the deposit usually reduces the rate earned.
- Inflation risk — after-tax rates can be below inflation, eroding real purchasing power over time.
- Open Bank Resolution (OBR) risk — registered banks are subject to the RBNZ OBR policy; in a bank failure, a portion of deposits can be frozen or hair-cut before government deposit-guarantee coverage applies.
- Concentration to NZ banking sector — depositors are unsecured creditors of a single registered bank; holding deposits across multiple institutions diversifies only modestly.
- Reinvestment risk — at rollover, the prevailing rate may be materially lower than the maturing rate.
Frequently asked
Is private credit safer than a term deposit?
Neither is automatically "safer". Term deposits are unsecured claims against a registered bank and subject to Open Bank Resolution; private credit funds hold secured interests in underlying loans (often property-backed) but carry credit, liquidity, and manager risk. The risk profiles are structurally different, so the right comparison depends on what a specific investor is trying to avoid losing.
Are private credit returns guaranteed?
No. Target returns published by fund managers are objectives, not guarantees. Past distributions are not a reliable indicator of future performance. Term deposit rates are contractually fixed for the deposit term, but the bank itself carries counterparty risk.
Can retail investors access the funds on this page?
Some of the funds listed are wholesale-only under Schedule 1 of the FMCA and are not open to retail investors. Others (e.g. First Mortgage Trust, Squirrel Monthly Income Fund) offer both retail and wholesale classes. Read each fund's disclosure documents for eligibility.
Why do private credit funds target higher returns than term deposits?
The funds take on credit risk (borrowers can default), liquidity risk (redemptions are limited), and manager risk that banks regulated by the RBNZ do not. The return premium compensates for those additional risks. Higher target returns are not free — they are a payment for accepting a different risk profile.
Change log
- 2026-04-23 — Initial publication. Source: fund IMs and bank websites as at 23 April 2026.
Disclaimer and risk warning.
The information on this page is general and is intended for wholesale investors as defined in Schedule 1 of the Financial Markets Conduct Act 2013 (FMCA). It is not financial advice, nor a personalised recommendation to buy, sell, or hold any financial product. Nothing on this page should be read as an endorsement of any specific fund or manager.
All wholesale investments carry risk of partial or total loss of capital. Target returns, where quoted, are objectives stated by the fund manager and are not guaranteed. Past performance is not a reliable indicator of future performance. Wholesale investors have fewer regulatory protections than retail investors under the FMCA.
Every numeric claim on this page links to a primary source document (Information Memorandum, Product Disclosure Statement, SIPO, Reserve Bank of New Zealand data, or the Financial Service Providers Register). Verify the data yourself before acting on it, and read the fund's full disclosure documents for the complete risk profile.
Wholesale Investor NZ is a directory service and does not provide financial advice. If you would like personalised advice, speak to a licensed Financial Advice Provider. Full disclaimer.