ASIC puts private credit sector on notice as risks emerge

The regulator said signs of borrower stress and credit deterioration were beginning to emerge as the market entered a more challenging period.

Ahead of 30 June, the Australian Securities and Investments Commission (ASIC) urged funds, trustees, and auditors to ensure their asset valuations “are current, accurate and grounded in realistic assumptions”.

“The sector is facing its first real test. Tighter liquidity, emerging borrower stress and signs of credit deterioration are testing valuations, governance and investor disclosures,” the regulator said.

“Early insights from ASIC’s private credit work indicate the market is moving from a period of rapid growth into a more demanding phase, with persistent macro-economic pressure and a slow creep in credit stress indicators.”

Private credit an enforcement priority

ASIC said that conditions across the US and much of Europe were already driving defaults, and while Australia’s market has structural differences, they are “not a defence against risk”.

ASIC said that exposure to private credit is increasing among retail investors and superannuation funds, warning that Australian investors can still be affected by offshore liquidity and redemption pressures through local feeder fund structures.

“When done well, private credit provides an important source of funding and supports economic growth and innovation. But weaknesses in governance, disclosure, valuation practices and conflicts management become more pronounced as conditions tighten,” ASIC said.

ASIC said that poor practice in the private credit industry remains an enforcement priority, and the regulator will act where standards fall short.

“These obligations cannot be outsourced. Participants must ensure that all those in their funds management value chain – from origination through to audit – are meeting their responsibilities to support participants’ obligations,” it said.

“ASIC’s message is straightforward: participants should use this reporting cycle to challenge assumptions, refresh valuations, and lift practices in line with ASIC’s 10 principles.”

Ongoing surveillance

Through an eight-week voluntary survey, ASIC has been monitoring the private credit sector.

Conducted from 26 March to 14 May 2026, the survey collected responses from 22 managers covering 52 funds and around $76 billion in assets under management.

ASIC said that this was more of a snapshot and that recent industry news had shown the limits of the survey data.

Nonetheless, preliminary insights from the work point to several trends:

• Credit deterioration is emerging unevenly, with pockets of higher defaults, impairments, and loan amendments.

• Redemption requests remain contained in aggregate, with higher activity observed in some feeder funds investing in global private credit managers.

• Leverage and line of credit usage remain minimal.

• Most funds continue to manage liquidity adequately, although buffers are tightening.

• Macro-economic pressures, including inflation, rising costs, and supply disruptions, are affecting borrower performance.

• Softer investor inflows are slowing growth and tightening lending conditions.

• Growth in the number of funds has notably slowed.

• Management of concentration risk is variable.

As a result, ASIC said that 30 June valuations should be a key point of action across the private credit market.

“If valuations do not reflect current conditions and incorporate verified accurate information, there is a higher risk of misinformation and poor investor outcomes,” it said.

[Related: HSBC faces $35m penalty after admitting scam failures]

Want to see more stories from trusted news sources?
Make Broker Daily a preferred news source on Google.