ASIC releases private credit report – PFA to maintain dialogue with regulator

ASIC has released its report, Private Credit in Australia (REP 814), into Australia’s $200 billion private credit sector. The report follows extensive surveillance of wholesale and retail private credit funds.

ASIC acknowledges that “Private credit, done well, has a valuable role to play in the Australian economy”. 

The report estimates that around half of the Australian private credit market is in real estate focussed finance, with a concentration in real estate construction and development finance. Whilst ASIC has not assessed the “systemic risk to the Australian system from private credit”, it highlights this is the area “…where we see the greatest area for improvement for investor protection and market integrity”. 

Greater regulation in Australian private credit was flagged in an accompanying statement to the report. ASIC Chair, Joe Longo, said: “Enhanced standards are needed to lift practices across the sector. They will help promote confidence, improve market integrity and empower investors to make informed decisions.”

Longo mentioned concern around behaviours which fall short of market expectations, and the rapid growth of the sector.

The Private Credit in Australia report mentioned concerns about some segments of the market, including conflicts of interest, lack of transparency in fees and valuations, consistent valuation methodologies and ambiguous terminology.

This report is a precursor to a final report of ASIC’s surveillance findings and its response to the discussion paper on Australia’s evolving public and private capital markets, which it expects will be released in November. 

PFA in dialogue with ASIC

The PFA, through its Issues & Regulatory Committee (IRC), has actively engaged with ASIC in the lead up to the issue of this report, and will continue to maintain an open and constructive dialogue with the regulator on behalf of members.

The PFA remains committed to supporting members as the regulatory landscape evolves and will provide regular updates. Members are encouraged to share feedback or raise requestions for the IRC’s ongoing discussions with ASIC by contacting the PFA on pfa@propertyfunds.org.au