ASIC’s surveillance of private credit retail and wholesale funds

ASIC has released Report 820: Private credit surveillance of retail and wholesale funds (Report), which summarises observations from ASIC’s review of private credit funds offered to both retail and wholesale investors and highlights areas of better and poorer practice. The Report follows Report 814: Private credit in Australia (REP 814), which ASIC commissioned and released in September 2025. Together, the two reports reveal failings in the sector and highlight opportunities for improvement that would ultimately benefit investors.

The release of the Report represents a significant escalation in ASIC’s oversight of the private credit sector. ASIC’s message is clear: private credit is good for the economy, but only if it is done well, and ASIC intends to use its regulatory muscle to ensure that happens.

ASIC’s surveillance highlights the need for substantial improvement in private credit fund practices, consistent with the four key areas identified in REP 814: conflicts of interest, fees and remuneration, portfolio transparency and valuation, and terminology. The surveillance found that private credit fund practices remain inconsistent and are not always executed well. While some funds demonstrate sound governance, ASIC identified poorer practices that are inconsistent with its guidance and may contravene financial services laws, including the Australian financial services licensee obligation to provide financial services efficiently, honestly and fairly, and the prohibitions against misleading or deceptive conduct.

Examples of poorer practices

The following examples were provided as examples of poorer practices:

  • Inconsistent and unclear reporting and terms, masking portfolio risks and challenging investor decisions.
  • Opaque interest margins and fee structures, obscuring the risk and cost to investors.
  • Weak governance and poorly managed conflicts of interest, risking harm to investors and confidence.
  • Poor valuation practices, impacting entry and exit prices, performance and fees.
  • Inadequate practices in key risk areas, indicating poor preparedness for stress scenarios.

Key findings

The Report sets out ASIC’s observations on the main operational areas where private credit funds can strengthen their practices. It highlights examples of good practice observed through ASIC’s surveillance and provides considerations for fund managers, trustees and responsible entities (REs) when reviewing their own frameworks. The table below outlines these areas, the features of good practice, and key considerations for improvement.

AreaGood practiceConsiderations
Fund disclosures and transparencyInvestors have access to timely, transparent information about portfolio strategy, exposures, risks and fees, enabling comparisons.
  • Ensure upfront fund disclosures and periodic fund reports adequately define key terms about a fund’s strategy and credit risk practices, providing clear and effective disclosure to investors.
  • Improve regular portfolio performance reporting to support fund comparisons and informed decision making.
  • Adopt consistent reporting practices and terminology, including timing, form and substance.
Marketing and distributionDesign and distribution practices are fair, transparent and appropriately targeted for investors.
  • Fund marketing does not mislead investors; for example, by playing down investment risks.
  • REs determine an appropriate target market, taking care that it reflects any high-risk or complex fund structures or features, and takes reasonable steps and monitors distribution so that distribution is consistent with the TMD.
  • Investment platform operators provide clear and accessible information about funds on their platform.
  • Wholesale fund operators have adequate compliance arrangements and resources in place to ensure fund units are marketed and distributed only to wholesale clients.
Fee and income transparencyFees and income structures are fair and transparent, giving investors and borrowers a clear view of total costs.
  • All fees and income streams are clearly disclosed to investors, giving a true representation of the manager’s total remuneration and costs to investors.
  • Interest rates charged to borrowers (which directly impact fund returns and investor outcomes) are fully and transparently disclosed.
  • Funds avoid complex fee and margin structures that may obscure the true costs to investors.
Governance and conflict management
  • REs and trustees act as stewards of investor capital, ensuring that their decisions are fair and in investors’ best interests.
  • Structures, processes and people promote sound decision making, compliance and accountability.
  • Conflicts of interest (COIs) are identified, disclosed and effectively managed or avoided.
  • REs and trustee boards actively oversee fund operations – including valuations, COIs, liquidity and treatment of impaired assets – to ensure fair and proper conduct.
  • There is adequate staffing (including appropriate expertise and experience in areas including credit, risk, valuation, liquidity and COI management), with regular reviews as funds grow and become more complex.
  • REs and trustees undertake appropriate monitoring and supervision, including of corporate authorised representatives.
  • RE and trustee boards are independent of the business. Avoid overly complex structures that heighten the risks of conflicts and unfair treatment of investors and borrowers.
  • Roles, decision-making and escalation processes are well-defined and documented, with clear accountability structures in place.
  • Avoid arrangements that unduly favour one party (e.g. fees, interest, co-investment, loan structuring), and systems are in place to ensure clear and fair allocation of assets across funds.
  • Related party transactions and instances of multiple exposures to the same borrower are subject to independent oversight and clearly disclosed to investors.
  • Fee and income structures are fair and appropriately manage any COIs.
ValuationValuations are fair, timely and transparent, with robust governance.
  • Funds have clear and consistent methodologies, policies and processes that produce fair valuations.
  • The frequency of valuations supports fair entry and exit prices for investors.
  • The fund clearly and effectively discloses its valuation policy to investors.
  • Fund valuation practices apply appropriate independence mechanisms and are subject to periodic external audit
Liquidity managementLiquidity risk is effectively disclosed and managed, avoiding structural mismatches, with fair redemption terms aligned with portfolio liquidity.
  • Redemption terms, liquidity gates and stress-testing practices are effectively disclosed to investors
  • There is a sustainable source of funds for distributions to investors, stemming predominantly from cashflows generated by underlying assets. Avoid paying distributions from investor capital or that of new investors.
Credit risk managementCredit risk is effectively managed across loan origination, portfolio construction, monitoring, impairment, default and repayment.
  • Fund managers apply standardised credit assessment and monitoring frameworks, and document credit decisions and risk ratings.
  • Fund managers regularly review borrower performance and establish escalation protocols for early signs of distress.
  • Fund managers adopt a consistent and well-documented approach to impairments.
  • Fund portfolios are regularly stress tested.
  • There is independent oversight of credit, impairment and default processes.

Enforcement and reform ahead

ASIC has already issued stop orders on several retail private credit funds due to poor disclosure and unsuitable distribution. It has also commenced enforcement investigations where conduct may have breached financial services law.

In 2026, ASIC will continue its surveillance and enforcement program with a focus on:

  • fees, margin structures, and management of conflicts of interest in wholesale private credit funds, particularly those with a real estate lending focus; and
  • distribution of private credit funds to retail clients, both directly and through advisers

ASIC has also indicated that it will update its regulatory guidance for wholesale funds to clarify how existing obligations apply in practice.

ASIC has stated that it will respond to poor practices with a range of regulatory measures, including ongoing monitoring of the private credit market through enhanced data collection, analysis, and surveillance, as well as further compliance and enforcement action where necessary to protect investors.

Enforcement and reform ahead

ASIC’s latest review signals a clear move toward stronger and more proactive supervision of the private credit sector, which has until now operated with limited transparency and inconsistent practices.

While the Report is not formal guidance, it provides a clear picture of ASIC’s expectations. Trustees, responsible entities, and fund managers should assess their governance, valuation, disclosure and conflict management frameworks against the practices identified in the Report. Taking early steps to align practices with the good practice examples highlighted in the Report will help reduce regulatory risk and demonstrate a clear commitment to transparency and good governance.