Funds under review in ASIC’s private credit probe

ASIC is reviewing the fund practices of a number of private credit funds and testing their compliance with financial services laws as part of its wider review into the private credit market.

The corporate regulator stated earlier this month that it was exploring how transparency could be improved in the private credit space, following a review into the private credit market.

In a statement this week, ASIC said it is increasing its surveillance of private equity and private credit funds in relation to fund governance, valuation practices, and the management of conflicts of interest.

“This surveillance will help us test and address key risks, such as the management of related-party transactions,” ASIC told Money Management’s sister title InvestorDaily.

“ASIC will provide updates to this work before the end of 2025.”

This follows recent report that Metrics Credit Partners was facing additional scrutiny from ASIC due to concerns about loan valuations and governance practices.

Last week, Bloomberg reported that ASIC was giving more attention to the $30 billion private credit manager and some of its transactions due its concerns about the firm’s practices and its substantial exposure to real estate.

Metrics Credit Partners has since issued a statement, outlining that it was not aware of any ASIC investigation related to specific practices or transactions in its business.

“In line with our peers and industry bodies, Metrics has actively participated in industry responses related to ASIC’s review of private and public markets, and like our peers has responded to requests from ASIC for information to assist its review of private and public markets,” it said.

“We are fully supportive of the role of regulators in ensuring the integrity and proper functioning of Australian financial markets and welcome strong, fit-for-purpose reforms.”

As a large alternative asset management firm with ASX-listed funds, Metrics said it was important for it to operate with robust governance standards. This includes the disclosure of industry exposures and the provision of detailed performance and portfolio risk settings to the ASX detailed.

“In relation to loan valuations, we use independent and highly experienced professionals to verify the market value and any potential impairment across our portfolio,” said Metrics.

“We will continue to engage with the regulator as it seeks to better understand the workings of private credit markets.”

Metrics Credit Partners chief executive Andrew Lockhart previously challenged any suggestions that the firm was under increased scrutiny.

“I get concerned around the linking of Metrics with the idea that a sector is under scrutiny,” Lockhart told InvestorDaily previously.

“We operate in a market where we’re transparent and happy for people to scrutinise our funds, our performance. All I ask is that people compare based on fact.”

Lockhart stressed that Metrics’ performance and governance standards spoke for themselves.

“If you look at Metrics’ funds over a 12-year period, we’ve never had a negative month … and we’ve been a proactive manager of our investors’ capital to protect and preserve their position,” he said.

“If Metrics is seen as the largest and most prominent manager, maybe the question ought to be: Why is that? Is it because we’ve delivered strong returns, managed risk consistently, adhered to high corporate governance standards? We’re transparent with our investors, we don’t have any conflicts of interest, and we’re subjected to independent oversight and review of our funds.

“We certainly operate under the highest governance standards globally.”