Key Takeaways
- • ASIC's report REP 846, "Private credit funds: Do investors know what they're getting?", published on 10 November 2026, found widespread disclosure and governance failures across 24 retail and wholesale private credit funds overseeing $18 billion.
- • Only two of 22 funds analysed "passed on the full economic benefit of interest and borrower fees onto investors"; retail funds retained interest margins up to 5.6% and wholesale funds up to 5.9%.
- • One related party received the equivalent of 38 cents for each $1 distributed to investors in 2025, with benefits exceeding four times the fund's disclosed management costs.
- • 88% of advice files recommending private credit allocations above 20% failed to demonstrate compliance with the best interests duty, and one proposed exposure reached 87% of a client's portfolio.
- • ASIC has already issued six interim stop orders, with further enforcement referrals underway, and plans to consult in early 2027 on broadening Regulatory Guide 45 to cover private credit funds.
Summary
The Australian Securities and Investments Commission (ASIC) has identified extensive disclosure and governance shortcomings across Australia's private credit funds, concluding that investors are still being denied essential information. Published on 10 November 2026, the regulator's 58-page report, Private credit funds: Do investors know what they're getting? (REP 846), followed an examination of 24 retail and wholesale funds overseeing $18 billion between November 2025 and August 2026. ASIC also reviewed 46 instances of personal advice delivered to retail clients by 19 advisers. According to the regulator, most poor practices flagged previously remained unresolved a year later, although it acknowledged improvements in parts of the market.
A central concern was the gap between income generated by lending activities and amounts reaching investors. Across 22 funds, only two "passed on the full economic benefit of interest and borrower fees onto investors." Retail funds retained interest margins reaching 5.6% relative to investor payments, while wholesale funds recorded margins as high as 5.9%. More than half the funds surveyed kept default interest collected from borrowers. In the most pronounced case, a lender connected to a fund retained borrower fees, interest margin and default interest that investors had not been told about. ASIC calculated, using approximate figures, that these benefits exceeded four times the fund's disclosed management costs, and that the related party received the equivalent of 38 cents for each $1 distributed to investors during calendar 2025. Seven of 10 retail funds and nine of 12 wholesale funds retained establishment or origination fees, with two failing to disclose the practice.
Commissioner Simone Constant said the industry was asking too much of investors, stating that "Investors should not need a PhD in corporate finance to understand how funds operate." She added: "We are not the returns police. We are not the margin police. However, we are the conduct regulator, and we are calling out that the pricing of risk and the treatment of risk need to be consistent with what's disclosed to those investors."
The review also found disclosure deficiencies across 22 of the 24 funds, along with complex related-party arrangements. Eighteen funds channelled investments through intermediary layers, including special purpose vehicles (SPVs), fund-of-funds and warehouse vehicles. In one instance, approximately 17% of a fund's assets were moved within a year to other funds run by the same management group without adequate disclosure. SPVs played a material role in 10 of 12 wholesale funds compared with three of 12 retail funds, and some funds used more than 500 vehicles over their operating lives.
Retail disclosure and advice also drew concern. ASIC found nine of 12 retail funds had not adequately communicated information investors needed, including the condition of troubled loans. Two funds reported loan default rates of 18% and 25% with little explanation. The regulator criticised the target market determinations of 10 retail funds, citing overly broad risk descriptions and unsuitable allocation recommendations. In advice files, 88% of those recommending private credit allocations above 20% failed to demonstrate best interests duty compliance, with the largest proposed exposure to one fund at 87% of a client's portfolio.
ASIC said it would weigh investor harm alongside disclosure deficiencies, with Constant stating, "We're looking at a whole range of regulatory responses that will be appropriate to the potential harm and disclosure." ASIC's surveillance has already produced six interim stop orders and multiple enforcement referrals. Separately, on 9 November, ASIC imposed interim stop orders on two Angas Securities funds over disclosure concerns, including one fund's exposure to collapsed property developer Bathla Group. ASIC plans to consult in early 2027 on revised fund guidance, including broadening Regulatory Guide 45 beyond mortgage schemes, and is pursuing powers to collect information regularly from managed investment schemes.
A central concern was the gap between income generated by lending activities and amounts reaching investors. Across 22 funds, only two "passed on the full economic benefit of interest and borrower fees onto investors." Retail funds retained interest margins reaching 5.6% relative to investor payments, while wholesale funds recorded margins as high as 5.9%. More than half the funds surveyed kept default interest collected from borrowers. In the most pronounced case, a lender connected to a fund retained borrower fees, interest margin and default interest that investors had not been told about. ASIC calculated, using approximate figures, that these benefits exceeded four times the fund's disclosed management costs, and that the related party received the equivalent of 38 cents for each $1 distributed to investors during calendar 2025. Seven of 10 retail funds and nine of 12 wholesale funds retained establishment or origination fees, with two failing to disclose the practice.
Commissioner Simone Constant said the industry was asking too much of investors, stating that "Investors should not need a PhD in corporate finance to understand how funds operate." She added: "We are not the returns police. We are not the margin police. However, we are the conduct regulator, and we are calling out that the pricing of risk and the treatment of risk need to be consistent with what's disclosed to those investors."
The review also found disclosure deficiencies across 22 of the 24 funds, along with complex related-party arrangements. Eighteen funds channelled investments through intermediary layers, including special purpose vehicles (SPVs), fund-of-funds and warehouse vehicles. In one instance, approximately 17% of a fund's assets were moved within a year to other funds run by the same management group without adequate disclosure. SPVs played a material role in 10 of 12 wholesale funds compared with three of 12 retail funds, and some funds used more than 500 vehicles over their operating lives.
Retail disclosure and advice also drew concern. ASIC found nine of 12 retail funds had not adequately communicated information investors needed, including the condition of troubled loans. Two funds reported loan default rates of 18% and 25% with little explanation. The regulator criticised the target market determinations of 10 retail funds, citing overly broad risk descriptions and unsuitable allocation recommendations. In advice files, 88% of those recommending private credit allocations above 20% failed to demonstrate best interests duty compliance, with the largest proposed exposure to one fund at 87% of a client's portfolio.
ASIC said it would weigh investor harm alongside disclosure deficiencies, with Constant stating, "We're looking at a whole range of regulatory responses that will be appropriate to the potential harm and disclosure." ASIC's surveillance has already produced six interim stop orders and multiple enforcement referrals. Separately, on 9 November, ASIC imposed interim stop orders on two Angas Securities funds over disclosure concerns, including one fund's exposure to collapsed property developer Bathla Group. ASIC plans to consult in early 2027 on revised fund guidance, including broadening Regulatory Guide 45 beyond mortgage schemes, and is pursuing powers to collect information regularly from managed investment schemes.
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