Term deposits offer certainty. Private credit offers income. For wholesale investors who can access both, the trade-off between them is more nuanced than the headline rates suggest. Here is the honest comparison.

The headline rate is only the start

A Big 4 twelve-month term deposit currently pays around 4.5% per annum1. The Eldium Income Fund currently distributes 9.0% per annum, paid monthly, net of fees2. On the surface that is a 4.5-percentage-point difference, more than double the income on the same dollar of capital.

But the two products do different jobs. A term deposit is a guaranteed return of capital plus a fixed coupon, backed by the bank's balance sheet and ultimately by the Financial Claims Scheme3. A private credit fund is an investment that pays interest income from a portfolio of underlying loans. The capital is not guaranteed. The rate is variable. The two are not direct substitutes, but they do compete for the same dollar.

Side-by-side

The clearest way to think about the difference is to lay them next to each other on the dimensions that actually matter:

  • Income rate: Term deposit ~4.5% p.a. fixed1. Eldium Income Fund 9.0% p.a. variable, net of fees, paid monthly2.
  • Capital guarantee: Term deposit is APRA-regulated and protected to $250,000 per ADI under the Financial Claims Scheme3. Private credit is an investment, capital is at risk.
  • Liquidity: A term deposit locks capital for the term, breaking it usually forfeits interest. The Eldium Income Fund offers a monthly redemption feature processed at the end of the following month, subject to available cash.
  • Tax treatment: Both pay interest income that is assessable in the year received4. Private credit funds distribute through a trust structure, which can include income, return of capital and capital gains components, depending on the underlying activity.
  • Minimum investment: Term deposits typically start at $1,000. Eldium Income Fund is for wholesale investors only5, $100,000 minimum.
  • Transparency: A term deposit is a single line on a bank statement. A private credit fund publishes a monthly investor report, an audited annual report, and underlying portfolio data.

What you give up, and what you get

The bridge between a 4.5% term deposit and a 9.0% private credit distribution is roughly 450 basis points. Over the last twenty years, the Cliffwater Direct Lending Index has delivered a 9.5% annualised return for senior secured direct lending6, with only one negative calendar year (2008). That kind of premium is not free. It compensates the investor for three things:

Credit risk. A term deposit is backed by the bank. The Eldium Income Fund is backed by the underlying loan portfolios of multiple non-bank originators, plus the structural protections built into each facility. Every facility is senior secured, asset-backed, and sits behind a first-loss tranche (see First-Loss Capital Explained).

Liquidity risk. A term deposit's term is contractual. A private credit fund's redemption queue is not contractual in the same way, redemptions are subject to available cash. The IMF's 2024 Global Financial Stability Report flagged liquidity transformation as the key feature distinguishing private credit funds from public-market exposures7.

Manager risk. A term deposit is administered automatically. A private credit fund relies on the investment manager to underwrite well, monitor in real time, and act decisively when a covenant is breached. ASIC's INFO 273 sets out what investors should look for in a manager's disclosure8.

The investor's job is to decide whether the extra income is worth those three risks, in their specific situation. For wholesale investors with a long enough horizon and an asset allocation that already includes guaranteed-capital products, the trade is often worth making with a portion of capital, not all of it.

Where they sit in a portfolio

A useful way to think about it: term deposits sit in the cash bucket. Private credit sits in the fixed-income or alternatives bucket. They are not competing for the same slot.

An investor who is currently holding excess cash earning 4.5% is leaving income on the table relative to what asset-backed private credit can offer. An investor who is fully allocated to growth assets or property may find an allocation to private credit sensible too. Most wholesale investors hold both. For a broader treatment of the asset class itself, see What is Asset-Backed Private Credit?

Five questions to ask before switching

  1. What is the structural protection? Is there a first-loss tranche behind investor capital, and what is its minimum size? In the Eldium Income Fund, the first-loss tranche is a minimum 10% of the Fund.
  2. What is the underlying portfolio? A diversified pool of senior secured asset-backed loans to non-bank originators is structurally different from a concentrated portfolio of property development or construction loans, even if the headline rate looks similar10.
  3. What is the redemption mechanism? Monthly, quarterly, or locked for a term?
  4. Who manages it? An experienced, conflicted-disclosed manager with their own capital in the first-loss tranche is structurally aligned with investors.
  5. What does the monthly report say? A fund that is transparent about utilisation, sector mix, covenant status and arrears is one you can monitor in real time.

The bottom line

Term deposits and private credit are not the same product, and the right answer for most wholesale investors is not "all of one and none of the other". For investors prepared to accept the risk for the income premium, asset-backed private credit can be a powerful component of a fixed-income allocation. The Eldium Income Fund is designed for exactly that allocation.

Sources & references

  1. Reserve Bank of Australia, Statistical Table F4, Retail Deposit and Investment Rates. rba.gov.au/statistics/tables
  2. Eldium Income Fund Class A Monthly Report, April 2026.
  3. Australian Prudential Regulation Authority, Financial Claims Scheme. apra.gov.au/financial-claims-scheme-0
  4. Australian Taxation Office, "Interest and dividends, when to declare". ato.gov.au
  5. ASIC, Information Sheet 19, Sophisticated investors and professional investors. asic.gov.au
  6. Cliffwater Direct Lending Index (CDLI). 20-year average annualised return tracking unlevered, gross-of-fees US middle-market direct loan performance. cliffwaterdirectlendingindex.com
  7. International Monetary Fund, Global Financial Stability Report, April 2024, Chapter 2: The Rise and Risks of Private Credit. imf.org
  8. ASIC, Information Sheet 273, Warnings on private credit funds. asic.gov.au/info-273
  9. Vanguard Australia 2025 Index Chart, 20-year annualised returns to 30 June 2025. vanguard.com.au
  10. Reserve Bank of Australia, Financial Stability Review, October 2025, non-bank lending sector update. rba.gov.au/publications/fsr

This article is general information only. It does not take into account your personal financial situation and is not financial advice. The Eldium Income Fund is open only to wholesale clients under section 761G of the Corporations Act 2001 (Cth).