Where things stand
Private credit funds
Through its surveillance of the market for private credit funds over the past year, and its engagement and consultation with industry, the Australian Securities and Investments Commission (ASIC) has developed in Report 820 and Report 823, principles ‘for sound private credit practices’ which it says are ‘also relevant to wider private markets’. These principles are:
Responsible entities and trustees are stewards of other people’s money and need to make decisions that are fair and in investors’ best interests.
Responsible entities and trustees are to ensure that they have sufficient human, financial and technological resources in running their funds.
Investors should have access to timely, transparent information on investment strategy, exposures, valuations, risks and fees.
Design and distribution practices are to be fair, transparent and appropriately targeted for investors.
Fees and costs are fair and transparent, giving investors and borrowers a clear view of total costs.
Conflicts of interest are to be identified, disclosed and effectively managed or avoided.
Governance structures, processes and people are to promote sound decision-making, compliance and accountability.
Asset valuations, and therefore unit pricing and performance fee calculations, are to be fair, timely and transparent, with robust governance.
Liquidity risk is to be effectively disclosed and managed, avoiding structural mismatches, with fair redemption terms aligned to portfolio liquidity.
Credit risk is to be effectively managed across loan origination, portfolio construction, monitoring, impairment, default and repayment.
ASIC expects fund managers operating retail or wholesale private credit funds to review their practices against the above principles and has flagged further enforcement action for misconduct and poor practices.
To assist fund managers of wholesale private credit funds to more easily identify and comply with existing regulatory obligations, ASIC has since published a one-page ‘catalogue’ summarising key legal obligations and regulatory guidance, which ASIC suggests might be useful for operators of other types of wholesale funds.
ASIC’s desired law reform for wholesale fund managers
In Report 823, ASIC recommends law reform ‘to strengthen the wholesale funds regime’ by:
Requiring wholesale fund operators to notify ASIC of wholesale schemes in operation.
Extending the retail funds requirement to prepare and lodge annual audited financial reports to include wholesale funds.
Extending the statutory duties of responsible entities of registered schemes (regarding fiduciary-like obligations) to include wholesale fund operators.
Requiring retail and wholesale fund operators to notify ASIC and investors of significant events on a timely basis (including when redemptions are suspended).
ASIC also recommends law reform to have additional powers to collect data from fund managers about wholesale funds. Further, ASIC will continue to advocate for amendments to the wholesale client tests to increase the current financial thresholds.
These proposed reforms will cut across all types of wholesale funds and will not be limited to credit funds.
What’s next
In Report 820, ASIC states that in 2026 the focus of ASIC’s surveillance of the private credit market will include:
Fees, margin structures and conflict-of-interest management in wholesale private credit funds, including those with a focus on real estate lending.
Distribution of private credit funds to retail clients through direct and advised channels.
ASIC has since stated that, in 2026-2027, it intends to refresh its regulatory guidance to consider private credit surveillance findings, reflect current risks and apply clearer guidance for wholesale funds.
ASIC’s law reform proposals will take time to be developed and considered by industry and lawmakers. In the meantime, ASIC will take steps to enhance data reporting and transparency in private markets, including by designing a pilot to collect more data from industry and working with the Australian Prudential Regulation Authority, the Reserve Bank of Australia and the Australian Bureau of Statistics to review the registered financial corporations data collection to expand its scope to encompass non-bank direct lenders (including fund operators) and clarify the data requests made of these lenders.