Distribution of private credit funds through advised channels to retail investors will be an ASIC priority for 2026 as it releases the results of its fund surveillance.
The report REP 280 Private Credit Surveillance surveyed 28 private credit funds between October 2024 to August 2025 including listed, unlisted, retail and wholesale funds. This spanned Australian managers such as Metrics Credit Partners and La Trobe Financial, global firms like KKR and smaller managers such as RELI Capital.
The report sought to assess issues such as fund disclosures, marketing, income transparency, governance and valuation.
Both La Trobe and RELI Capital have already received interim stop orders from ASIC regarding certain private credit funds they manage.
Eight private credit funds were available to wholesale clients as non-registered funds while 20 were retail registered funds, varying in size from $11 million to $12 billion in assets under management. The average AUM was $26.8 billion while the retail funds had an average number of investors at 3,421 although this dropped dramatically to 378 for the wholesale funds.
Examples of poor practice observed included:
- 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.
Further work will be enacted in 2026 by the regulator around fees, margin structures and conflict of interest management in wholesale private credit funds and distribution of private credit funds to retail clients through direct and advised clients.
Distribution practices
The global investment managers and larger wholesale funds primarily relied on administrative platforms for distribution, ASIC said, while smaller local funds primarily used their own distribution channels.
Few retail private credit funds required, as part of the distribution conditions in their target market determinations (TMDs) that investors receive financial advice prior to investing but advisers were still described as a key distribution channel for 16 retail funds.
Some retail funds tailored their distribution conditions to ensure distribution was directed towards the target market. As part of the distribution conditions, two retail funds specified that clients should receive personal advice, while seven retail funds required unadvised retail investors to fill out a questionnaire prior to investing.
Poor distribution practices included a wholesale frozen fund which continued distribution even though a substantial proportion of its loans were in default and investor redemptions had been frozen.
Meanwhile, two wholesale funds did not have adequate arrangements to ensure they were providing financial services only to wholesale clients, consistent with their licence authorisations. These funds failed to verify the wholesale client status through the income and asset test accountants’ certificate.
Many retail funds described themselves in TMDs as being suitable for investors with a ‘low risk tolerance’, and stated that investors with a capital preservation investment objective were in the target market which ASIC was concerned was “inaccurate”.
Research houses
Regarding the role of research houses in private credit, which had been flagged in ASIC’s September report, it said their report could “significantly influence financial advisers” as well as investment platforms and investors.
They are also relied heavily on by private credit funds who use their external fund ratings to support their direct and indirect marketing efforts.
ASIC observed private credit researchers relied heavily on fund operators and investment managers to provide data and information, and have limited capacity for independent verification.
Researchers’ assessments tended to prioritise governance structures and investment strategy over direct credit risk analysis. Furthermore, the researchers ASIC engaged with highlighted a lack of standardisation in valuation and provisioning practices across the Australian market, raising concerns about transparency and consistency.
“Given the considerable influence a rating can have on a fund’s distribution and an investor’s decision, research houses hold a unique position within the market. This role enables them to potentially drive improvements across critical areas such as fund governance, valuation practices, risk management practices and disclosure standards.
“It is therefore important for research houses to ensure the robustness of their ratings processes in the private credit market, to help influence industry practices and support trust and confidence in this market,” ASIC said.
