Private credit funds under scrutiny: lessons learned from interim stop orders
Recent regulatory action confirms that the private credit sector faces increasing examination from the Australian Securities and Investments Commission (ASIC) and highlights the importance of robust product design and transparent disclosure. ASIC recently issued two high-profile interim stop orders as part of its private credit surveillance, following the release of ASIC’s Report 814 Private credit in Australia (which we previously discussed in our article ASIC reveals private credit market red flags) and subsequently noted in Report 820 Private credit surveillance: retail and wholesale funds (REP 820), which was released on 3 November 2025.
In this article, we look at the lessons learned from these interim stop orders and ASIC’s overall assessment in REP 820, highlighting the regulator’s attention to fund transparency, governance, valuation practices, conflicts management, and the fair treatment of investors. When it comes to preparing a target market determination (TMD), the devil is in the detail. REP 820 covers ASIC surveillance activity between October 2024 and August 2025, which included reviewing marketing and distribution arrangements. When it came to reviewing the TMDs of retail private credit funds, results were mixed, with roughly half obtaining a pass-mark from ASIC and others left with some homework to lift their game.
La Trobe US Private Credit Fund
ASIC made an interim stop order on 18 September 2025 preventing further retail offers of the La Trobe US Private Credit Fund being made by La Trobe Financial Asset Management Limited (La Trobe) while it assessed whether the TMD appropriately reflected risks and product design. The fund invests primarily in a portfolio of senior secured first-lien term loans issued to US corporate middle market companies that are not rated by any rating agency. ASIC considered that investing in those loans involved an ‘above average’ amount of risk and volatility and loss of principal investors.
ASIC’s concerns were that the TMD allowed an inappropriate suggested portfolio allocation for retail investors and failed to specify a clear investment timeframe. The interim stop order barred La Trobe from dealing in or providing general advice recommending the fund for 21 days. ASIC recommended existing investors reassess the fund’s suitability against their financial objectives, situation or needs. In REP 820 ASIC indicated that the distribution conditions were not appropriate.
ASIC revoked the interim stop order on 1 October 2025 after La Trobe reduced the recommended allocation from 35 per cent to 10 per cent and identified an investment timeframe.
Key lesson: TMDs must set realistic and accurate portfolio allocation limits and specify an investment timeframe. Overly broad allocations or vague time horizons could trigger ASIC intervention, even for large established asset managers.
In REP 820 ASIC has reported that half of all retail funds in its surveillance had a ‘satellite’ or ‘minor’ allocation in their TMD, which was considered appropriate for their potentially higher-risk investment strategies. In other cases, ASIC had concerns about retail funds with potentially higher-risk investment strategies using a ‘core’ (inconsistently defined as 25 per cent to 75 per cent or up to 50 per cent) or ‘major’ (up to 75 per cent) allocation.
RELI Capital Mortgage Fund
ASIC made an interim stop order on 19 September 2025 halting retail offers of the RELI Capital Mortgage Fund by RELI Capital Limited (RELI Capital) while it assessed whether the TMD accurately reflected the fund’s risks and appropriate investor use. ASIC was concerned that the TMD could classify the fund as a ‘core component’ (25 per cent to 75 per cent) of an investor’s portfolio, understated risk by labelling it ‘risk level 3 (low to medium)’, inappropriately described the fund as suitable for investors seeking capital preservation, and failed to include distribution conditions. The interim stop order prevented RELI Capital from dealing in or providing general advice recommending the fund for 21 days. ASIC recommended existing investors reassess the fund’s suitability against their financial objectives, situation or needs.
ASIC revoked the interim stop order on 29 September 2025 after RELI Capital revised the TMD by limiting intended product use to up to 25 per cent, clarifying risk, removing the capital preservation suitability claim, and introducing distribution conditions.
Key lesson: TMDs must not understate risk, misrepresent suitability (such as ‘capital preservation’ in circumstances where investors’ capital is at risk), or omit distribution conditions. There is a risk ASIC will seek to intervene where target market settings are too broad or inconsistent with the fund’s true risk profile.
In REP 820, ASIC found that half of all retail funds were rated as medium or higher risk in their TMDs, and that marketing material appropriately disclosed key and heightened areas of risk associated with liquidity, valuation and credit. TMDs that caused ASIC concern described the relevant funds as suitable for investors with a ‘low risk tolerance’ and identified investors with a capital preservation investment objective as within the target market.
Distribution conditions that were commended by ASIC in REP 820 included specifying that prospective investors should obtain personal advice, requiring non-advised investors to complete a questionnaire, and banning the use of mass communication channels to promote the fund (which were considered inappropriate).
What should you do?
These recent interim stop orders and REP 820 confirm ASIC is actively monitoring the private credit sector as part of its response to Australia’s evolving capital markets. Fund managers and responsible entities should review disclosures, valuation practices, governance and distribution frameworks to ensure compliance and avoid potential enforcement action.
If you need expert guidance or support navigating these requirements, don’t hesitate to get in touch with our HW Funds team for assistance.
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