ASIC’s private credit surveillance: key insights for retail and wholesale funds
ASIC recently completed a comprehensive surveillance of the private credit sector, taking a very close look at both retail and wholesale funds. This article outlines ASIC’s main findings from the surveillance, highlights the key areas of focus, and discusses recommended industry practices for private credit funds.
ASIC’s reports
On 5 November 2025, the Australian Securities and Investments Commission (ASIC) released 25-264MR: A roadmap for capital markets to grow our economy (25-264MR) including REP 820: Private credit surveillance report: Retail and wholesale surveillance (REP 820).
REP 820 sets out ASIC's findings from this surveillance and assesses how these funds manage key risks that are critical to investor confidence and market operation. ASIC has further highlighted that private credit participants (including responsible entities (REs) / trustees and investment managers) in the private credit market should adopt strong industry practices that align with the better practices identified in REP 820. REP 820 builds on the information for private credit managers provided in Report 814: Private credit in Australia (REP 814), which was released by ASIC in September 2025.
You can read more about ASIC's focus and proposed changes in our latest articles:
- Shifting dynamics in Australia's capital markets: private credit and public market trends;
- ASIC proposes increased regulation of wholesale funds;
- Private credit funds under scrutiny: lessons learned from interim stop orders; and
- ASIC announces 2026 enforcement priorities: focus on private credit and market integrity.
Surveillance activity
As part of its activities in this space, from October 2024 to August 2025, ASIC conducted a surveillance of 28 private credit funds, including listed, unlisted, retail and wholesale funds. The specific areas of focus were:
fund disclosure and transparency;
marketing and distribution;
fee and income transparency;
governance and conflict management;
valuation;
liquidity management; and
credit risk management.
Findings
The report sets out examples of better and poorer practices observed by ASIC in the conduct of its surveillance. Below is a summary of the findings relating to each of the report’s areas of focus.
Fund disclosures and transparency
Better practice involves providing investors with clear, timely, and comprehensive information about a fund's investment strategy, portfolio composition, and risk profile. This includes defining key terms consistently, explaining valuation bases (such as 'as is' versus 'as if complete'), and issuing detailed periodic reports that cover loan types, security ranking, loan to value ratios (LVRs), and default statistics.
Poorer practice, by contrast, includes vague or incomplete disclosures, inconsistent terminology, and limited reporting that makes it difficult for investors to compare funds or assess risk. In some cases, funds provided differential access to information, giving certain investors more detailed data than others, which undermines fairness and transparency.
Marketing and distribution
Effective marketing and distribution practices ensure products are promoted accurately and targeted appropriately. Better practice includes balanced risk disclosures in marketing materials, tailored distribution conditions (such as requiring advice or investor questionnaires), and target market determinations (TMDs) that reflect the fund's risk profile.
Poorer practice includes aggressive marketing tactics, such as offering bonuses or using mass campaigns, and misrepresenting risk by downplaying potential losses or mischaracterising products as low risk. ASIC also observed inadequate wholesale client verification and inappropriate portfolio allocation recommendations in some TMDs that could expose unsuitable investors to high-risk products.
Fee and income transparency
Transparency in fees and income structures is critical for investor trust. Better practice involves full disclosure of all fees and income streams, including management fees, borrower fees, and interest margins, and clearly explaining how these amounts are treated. Some funds went further by passing on excess income to investors and quantifying retained fees in disclosure documents.
Poorer practice includes retaining borrower fees and interest margins without disclosure, using complex fee structures that obscure true costs, and failing to disclose substantial income beyond headline management fees. These practices can misalign incentives and compromise investor outcomes.
Governance and conflict management
Strong governance frameworks and effective conflict-of-interest (COI) management underpin investor protection. Better practice includes independent oversight by responsible entities (REs) or trustee boards, comprehensive COI policies, and documented approvals for related-party transactions. Some funds established independent committees for valuation and impairment decisions, reducing the risk of bias.
Poorer practice includes weak or absent COI policies, poor record-keeping, and allocation decisions influenced by conflicted interests. ASIC also noted cases where related-party transactions were not adequately disclosed, and governance structures lacked independence, increasing the risk of misconduct.
Valuation practices
Valuations determine entry and exit prices and influence performance fees, making robust governance essential. Better practice includes regular valuations (monthly or quarterly), transparent valuation policies disclosed to investors, and independent third-party reviews of asset values and impairments.
Poorer practice includes absent or incomplete valuation policies, infrequent valuations, and opaque methodologies that hinder investor understanding. ASIC also observed conflicts where investment committees responsible for approving loans also oversaw valuations, compromising independence.
Liquidity management
Liquidity risk must be managed carefully in private credit funds that often hold illiquid assets. Better practice includes clear disclosure of redemption terms and liquidity risks, frequent stress testing, and contingency planning. Funds should ensure distributions are funded from portfolio cash flows rather than investor capital.
Poorer practice includes absent liquidity policies, inadequate stress testing (especially in wholesale funds), and side letters granting unequal redemption rights. ASIC also flagged cases where distributions were funded from investor capital, creating sustainability and fairness concerns.
Credit risk management
Disciplined credit risk management is vital to protect investor capital. Better practice includes detailed borrower due diligence, internal credit ratings with regular reviews, and proactive monitoring supported by documented default management protocols. Some funds implemented rigorous processes, including site visits and stress testing.
Poorer practice includes limited or informal credit assessments, the absence of internal credit scoring, and inconsistent definitions of 'default,' which make performance reporting unreliable. ASIC also noted inadequate impairment recognition and poor documentation of credit decisions.
What’s next?
ASIC has confirmed that in 2026 it will continue its surveillance of the private credit market with a focus on fees, margin structures and COI management in wholesale private credit funds, including those with a focus on real estate lending, and the distribution of private credit funds to retail clients through direct and advised channel.
It is anticipated ASIC will intensify its data collection, analysis and surveillance of the private credit market, as well as conduct further compliance and enforcement actions (including targeted stop orders) to protect consumers. These compliance and enforcement actions will be aimed at deterring misconduct, promoting market integrity, and supporting trust and confidence in Australia's private credit market as it continues to grow and mature.
We encourage all participants in the private credit sector to comprehensively review their current governance frameworks, policies and procedures, disclosure and marketing documents to respond to ASIC's expectations. Reach out to our team - we can help you prioritise compliance and risk and ensure you're ready to meet ASIC's growing expectations.
This article was prepared with the assistance of Patrick McMullin, Law Graduate.
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