Key Takeaways
- • ASIC's Report 846 surveyed 46 advice instances involving six private credit funds from nine AFSLs and found concerns with advice quality in 15 instances provided by five advisers associated with two licensees.
- • ASIC found a 20-50 per cent allocation to private credit resulted in an 87 per cent non-compliance rate, compared with 13 per cent for allocations of 5-10 per cent.
- • Recommended allocations ranged from 0.6 to 87 per cent of clients' investable funds, with a median of 12.4 per cent and a median dollar amount of $100,000 (maximum $700,000).
- • Advisers in several files relied solely on fund manager documentation or licensee research and did not explain liquidity limits, withdrawal windows or underlying loan risk.
- • ASIC explicitly considered client liquidity needs in only 10 of the 46 files reviewed, and flagged possible financial incentives from private credit managers as a scrutiny area.
Summary
The Australian Securities and Investments Commission (ASIC) has published Report 846, "Private Credit Funds: Do investors know what they are getting?", outlining examples of poor practice by financial advisers recommending private credit funds to clients. According to the report, as reported by Money Management, the regulator surveyed 46 instances of advice across six private credit funds from nine different Australian financial services licensees (AFSLs). ASIC said "most financial advisers" demonstrated compliance, typically where private credit was a modest portion of a portfolio, but raised concerns about the quality of advice in 15 instances provided by five advisers associated with two licensees.
Allocation sizes were a central concern. The median recommended amount was $100,000, reaching as high as $700,000. As a share of investable funds, the median was 12.4 per cent, ranging from 0.6 per cent to 87 per cent. ASIC identified substantial allocations to a single fund as correlated with poor-quality advice, exposing clients to significant concentration risk without adequate justification. Based on its sample, a 20-50 per cent allocation resulted in an 87 per cent non-compliance rate, against 13 per cent for allocations of 5-10 per cent. One example cited a client in her late 50s with a conservative risk profile who was encouraged to invest around half of her lump-sum settlement into a single private credit fund. ASIC noted that higher returns were prioritised over client needs and that larger allocations could be influenced by financial incentives from managers. The regulator stated it "will closely scrutinise" arrangements where such incentives may affect advice.
Research quality was another area of weakness. ASIC found some advisers conducted limited investigation, failed to keep records, or relied purely on fund manager documentation. Others leaned excessively on licensee research even where conflicts or complexity warranted independent assessment. Disclosure to clients also fell short in some cases. ASIC said liquidity needs were explicitly considered in only 10 of the 46 files, and the regulator's table showed concerns about inadequate explanation of specific fund features (89 per cent of files), private credit risks (78 per cent), investors' liquidity needs (78 per cent) and alternative options (70 per cent).
ASIC's preferred practice includes clearly describing underlying assets and distinguishing them from traditional fixed income, explaining that exposure is limited to property-related lending, and stating that the fund does not offer daily liquidity, that withdrawals occur only in specified windows, and that capital repayment depends on underlying loan repayment. The Financial Advice Association Australia (FAAA), through Phil Anderson, general manager for policy, advocacy and standards, noted that the report's primary focus was fund conduct and that the adviser file review was relatively small, while agreeing on the importance of research, risk explanation and appropriate allocation sizing. Source: ASIC, November 2026.
Allocation sizes were a central concern. The median recommended amount was $100,000, reaching as high as $700,000. As a share of investable funds, the median was 12.4 per cent, ranging from 0.6 per cent to 87 per cent. ASIC identified substantial allocations to a single fund as correlated with poor-quality advice, exposing clients to significant concentration risk without adequate justification. Based on its sample, a 20-50 per cent allocation resulted in an 87 per cent non-compliance rate, against 13 per cent for allocations of 5-10 per cent. One example cited a client in her late 50s with a conservative risk profile who was encouraged to invest around half of her lump-sum settlement into a single private credit fund. ASIC noted that higher returns were prioritised over client needs and that larger allocations could be influenced by financial incentives from managers. The regulator stated it "will closely scrutinise" arrangements where such incentives may affect advice.
Research quality was another area of weakness. ASIC found some advisers conducted limited investigation, failed to keep records, or relied purely on fund manager documentation. Others leaned excessively on licensee research even where conflicts or complexity warranted independent assessment. Disclosure to clients also fell short in some cases. ASIC said liquidity needs were explicitly considered in only 10 of the 46 files, and the regulator's table showed concerns about inadequate explanation of specific fund features (89 per cent of files), private credit risks (78 per cent), investors' liquidity needs (78 per cent) and alternative options (70 per cent).
ASIC's preferred practice includes clearly describing underlying assets and distinguishing them from traditional fixed income, explaining that exposure is limited to property-related lending, and stating that the fund does not offer daily liquidity, that withdrawals occur only in specified windows, and that capital repayment depends on underlying loan repayment. The Financial Advice Association Australia (FAAA), through Phil Anderson, general manager for policy, advocacy and standards, noted that the report's primary focus was fund conduct and that the adviser file review was relatively small, while agreeing on the importance of research, risk explanation and appropriate allocation sizing. Source: ASIC, November 2026.
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