The corporate regulator has identified inconsistent disclosure, inadequate governance, and opaque fee structures throughout Australia's $200 billion private credit market, and has said it will implement additional regulation over the private credit market, writes Trevor Withane.
In ASIC Report 820, released on 5 November 2025, ASIC said it reviewed 28 Private Credit Funds, totalling nearly $30 billion in assets, during the period from October 2024 to August 2025. ASIC investigated governance, valuation, liquidity, and the methods each fund manager used to distribute their products.
ASIC determined that although some fund managers demonstrated effective controls, there were "materially weaker" practices at other fund managers that could damage investor confidence and market integrity. In particular, ASIC indicated that fund managers demonstrated inconsistencies in terms used, limited transparency regarding fees and margins, and ineffective management of potential conflicts of interest.
Fees and margins not clearly disclosed
A significant issue raised by ASIC was the lack of clarity regarding disclosure of management and performance fees, retained lending margins and borrower-paid charges.
For example, ASIC reported that a wholesale fund retained a 7.5 per cent net interest margin as opposed to transferring this to its investors, while another fund charged numerous borrower fees and penalty interest of up to 40 per cent. Few of the funds provided details of total manager compensation, which presented challenges to investors attempting to determine the actual cost and return on investment.
Governance and valuation
ASIC also noted that several fund managers did not provide adequate documentation for governance arrangements and insufficient separation existed between the functions of the investment team and the valuation function.
Several funds used "as-if-complete" valuations for property development projects and failed to disclose these valuations, potentially inflating asset value and returns. Some of the funds conducted periodic valuations, and/or lacked written policies and procedures.
Liquidity and credit risk
Liquidity management was another area where fund managers were lacking. Although the funds held illiquid assets and offered regular redemptions, only two wholesale funds within ASIC's sample conducted stress testing of their assets.
Additionally, credit risk frameworks were inconsistent among the funds; specifically, default definitions were unclear, and different methods were utilised when assessing impairment.
Retail marketing and distribution
ASIC also noted that certain funds marketed their products as "low-risk" and/or "capital-preserving" even though they were investing in higher-risk or illiquid assets. ASIC reminded responsible entities that retail funds must comply with their design and distribution obligations, and must have an appropriate target market determination.
Trevor Withane, founder and managing partner of Ironbridge Legal, said the results indicate a turning point for the industry.
"ASIC has clearly signalled that private credit can no longer operate in a lightly regulated space," he said.
"The managers, trustees and advisers in the private credit market will need to review their structure, disclosures and oversight processes to confirm compliance with the Corporations Act and ASIC Act. The risk now is not only regulatory action but civil litigation from investors and/or borrowers should there be deficiencies in disclosures or governance."
“Ironbridge Legal is already engaged by borrowers seeking to challenge loan agreements.”
Next steps
ASIC has initiated enforcement investigations in several instances and has implemented interim stop orders. ASIC will continue to monitor the private credit market in 2026, focusing on fee and margin structures, conflicts of interest, and the distribution of private credit products to retail clients.
Fund managers are urged to quantify all fees and margins, ensure independent oversight of valuations, stress test liquidity, and standardise default metrics. Advisers and investors are encouraged to demand clearer disclosure before committing capital.
Trevor Withane is a disputes and insolvency lawyer at Ironbridge Legal.
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