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Australia’s capital markets are strong and evolving, with the private credit sector emerging as a powerful $200 billion force that is unlocking new opportunities for investors and borrowers alike.
In response to its rapid growth, the Australian Securities and Investments Commission (ASIC) is calling on the industry to urgently lift its standards to ensure the market’s long-term health and integrity.
The call to action follows a review of the private credit funds sector, which highlighted both positive practices and significant areas of concern that require immediate action.
ASIC chair Joe Longo said the private credit sector is extremely important, but requires a lifting of standards to boost confidence and integrity.
“When an industry agrees on clear standards, it shows a strong commitment to doing things right and we welcome the industry’s commitment to leading this work. They need to act decisively,” said Longo.
Longo said ASIC expects private credit providers to share responsibility in upholding high standards and “will not hesitate to intervene where progress falls short.”
In the latest episode of Broker Daily Uncut, Finni Mortgages principal Eva Loisance said a lot of private credit providers can be “sharky” and is not surprised there is a regulatory crackdown.
“There are companies out there that would entertain the idea that you can get a loan, charge you along the way and they never had any intention to approve anything,” she said.
Podcast co-host Alex Whitlock said the private credit sector is extremely valuable for borrowers and the brokers who specialise in this space.
“There are going to be instances where brokers have a customer where suddenly you need to dip into that area and then it gets difficult. If you’re not working with private credit and private lenders all the time, knowing who’s who and what’s what can be difficult,” Whitlock said.
A sector of opportunity and risk
The review confirms that the growing availability of private capital has met a genuine need in the economy.
When ‘done well’, private credit complements the banking system, providing crucial opportunities for innovation, employment, and growth.
However, reports uncovered several concerning practices that threaten investor confidence and market integrity:
- Opaque fees and remuneration: Structures that often hide the true cost of managing a fund and create misalignment between managers and investors.
- Related-party transactions: Governance arrangements that fail to adequately address conflicts of interest, such as lending to related parties or transferring investments between funds under the same management.
- Valuation practices: Inconsistent methodologies and a lack of independence in how assets are valued and impairments are recognised.
- Inconsistent terminology: A lack of clear, consistent use of key terms like “investment grade”, “security”, and “senior debt”, which hampers effective disclosure.
- Concentration risk: A distinct feature of the Australian market, with an estimated half of the $200 billion in assets invested in real estate, particularly higher-risk construction and development projects, often involving less experienced retail investors.
Surveillance and enforcement action already underway
ASIC’s early surveillance findings from both retail and wholesale funds align directly with the report’s insights, particularly regarding valuations, liquidity, and transparency.
The regulator has already demonstrated its willingness to intervene, issuing design and distribution stop orders against several funds, including the RELI Capital Mortgage Fund and La Trobe’s US Private Credit Fund and Australian Credit Fund, due to poor disclosure practices.
“Some of the poorer practices are potentially inconsistent with financial services law and ASIC guidance, including the requirement to provide financial services efficiently, honestly and fairly, and to avoid misleading or deceptive statements,” said ASIC.
A path forward: Industry leadership and regulatory roadmap
ASIC has welcomed the industry’s willingness to engage and implement more consistent standards.
The regulator is encouraging industry bodies to proactively review and enhance standards, drawing on both local and international best practices.
In November, ASIC will release a comprehensive response, including:
- Findings from its ongoing private credit surveillance.
- A set of guiding principles for compliant disclosure and conduct.
- A forward-looking regulatory roadmap detailing expected industry standards and future surveillance priorities.
- Additional expert reports to inform the sector’s development.
Supporting public markets
Alongside its focus on private credit, ASIC reaffirmed its commitment to supporting Australia’s public markets.
While acknowledging strong existing frameworks, ASIC is implementing changes to improve attractiveness, including streamlining the IPO process, fostering competition, and reviewing listing rules in liaison with market operators.
The message from ASIC is clear: the private credit sector represents a major opportunity for the Australian economy, but its sustainable growth depends on a unified commitment to high standards, transparency, and fair practice. The industry is now on notice to lead this change.
[Related: ASIC halts mortgage fund over investor suitability concerns]
