A Deep Dive into Australia’s Booming Private Credit Sector
In the ever-evolving financial landscape of Australia, the private credit sector has garnered considerable attention in recent times. According to a survey conducted by the Australian Securities and Investments Commission (ASIC), the sector has seen an exponential growth over the past 18 months. However, the survey has also unveiled a disturbing array of questionable practices within this flourishing sector.
Explosive Growth of Private Credit Market
Australia’s private credit market, currently estimated by ASIC to have $200 billion in assets under management, continues to expand at a rapid pace. Various factors are attributed to this growth, including the rising size of Australian superannuation savings seeking investment diversification and yield. Furthermore, a moderation in bank lending to higher-risk real estate ventures and increased retail investor participation through ‘evergreen’ and exchange-traded investment products are also contributing to the sector’s expansion. This underlines the significance of a well-regulated private credit market within the Australian economy.
ASIC’s Surveillance on Private Credit Funds
From October 2024 to August 2025, ASIC carried out a surveillance exercise covering 28 private credit funds. These included listed, unlisted, retail, and wholesale funds. ASIC acknowledges that certain private credit operators and investment managers have demonstrated commendable practices that set a benchmark for the sector. However, the surveillance exercise also unearthed numerous failings within the sector.
Unveiling Poor Practices
Under the heading “poorer practices”, ASIC highlighted a series of unsettling findings. Some of these pertained to lack of transparency in disclosing details about investment managers, investment strategies, and underlying funds. In certain cases, the nature of the underlying assets remained unclear for investors. It was also found that most funds did not disclose information about the interest rates charged to borrowers within their loan portfolios.
Weak Oversight and Lack of Transparency
Another alarming trend observed was the minimal supervision of fund transactions by the entities responsible for several retail funds. Instead, they heavily relied on the investment managers to self-report any issues, including investment performance. This trend of weak oversight was also prevalent among most of the wholesale funds. Numerous instances of non-disclosure of related party transactions or arrangements were identified, which raises serious concerns about the lack of transparency in operations.
Opaque Valuation Practices and Unrecorded Credit Assessments
ASIC’s findings also pointed towards the absence of comprehensive valuation policies and opaque valuation practices within the sector. In a few cases, wholesale funds did not formally document their credit assessment processes or failed to regularly review credit assessments conducted post the initial loan origination.
ASIC’s Stand on These Findings
Given the gravity of these findings, ASIC Chair Joe Longo, in his speech to the National Press Club, warned the private credit sector to improve its industry practices. He suggested that if the sector fails to elevate its practices, law reforms introducing new mandatory obligations could be considered as a measure to uplift standards and address poor consumer outcomes. However, he also emphasized that more rules would not be his first choice. Nonetheless, if poor practices continue to undermine the sector’s integrity, alternatives may have to be explored.
This comprehensive report by ASIC underlines the urgent need for improved transparency and accountability within Australia’s burgeoning private credit sector. As the sector continues to grow, it’s crucial that it operates with the highest standards of integrity to ensure the protection of consumers and the overall health of the Australian economy.
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