ASIC's new enforcement priority on the private credit sector: What you need to know
03 December 2025
Key insights
- ASIC has announced its 2026 enforcement priorities, of which one of the new enforcement priorities relate to poor private credit practices.
- This follows from ASIC's private credit fund surveillance report 820 Private credit surveillance report: Retail and wholesale surveillance (REP 820), that highlights significant room for improvement for the sector. REP follows the release of Report 814 Private Credit in Australia (REP 814), which identified similar themes.
- REP 820 outlines 10 guiding principles when private credit is done well, as well as 7 key areas that private credit funds should uplift their practices on.
- All private credit funds, both retail and wholesale, should benchmark themselves to REP 820 and uplift their practices, to align to industry better practices and avoid regulatory enforcement.
"This new enforcement priority should send a message to the rapidly expanding private credit sector to get its governance right. It comes on the back of our recent private credit fund surveillance report that highlights significant room for improvement."
ASIC Deputy Chair Sarah Court at the ASIC Annual Forum
Introduction
ASIC has announced its 2026 enforcement priorities, of which one relates to poor private credit practices. Private credit participants and individual fund operations need to understand ASIC's focus areas and to act now to avoid regulatory investigation and possible enforcement action.
We have outlined ASIC's focus areas and what private credit participants can do to mitigate risk of regulatory action.
Background to ASIC's look into Private Credit
ASIC's REP 820 outlines that Australia has experienced rapid expansion in its private credit market over the past 18 months. The market is estimated at $200 billion in assets under management and continues to grow, driven by factors such as the increasing size of Australian superannuation savings focused on seeking investment diversification and yield; moderation in bank lending to higher-risk real estate ventures; and increased retail investor participation through ‘evergreen’ and exchange-traded investment products.
Private credit broadly refers to non-bank lending, where loan assets are not traded on public markets or widely issued publicly. Operating alongside bank lending, private credit enhances financial market efficiency and economic growth by supplying capital in areas where traditional bank lending may be constrained. This flexibility enables borrowers to finance complex or innovative projects while offering investors an alternative asset class with diversification benefits and low correlation to public equity markets.
From October 2024 to August 2025, ASIC conducted a surveillance reviewing 28 private credit funds, including listed, unlisted, retail and wholesale funds. ASIC's surveillance highlighted that significant improvements in practices in the private credit sector is required. ASIC's surveillance highlighted poorer practices, for example, 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; and weak governance and poorly managed conflicts of interest, risking harm to investors and confidence.
The 10 principles for private credit done well
ASIC's message is clear - organisations the private credit market should adopt strong industry practices that align with the following guiding principles for doing private credit well.
Principles | Why it matters | Considerations for private credit participants |
| 1. Stewards of other people's money REs and trustees act as stewards of investor capital, ensuring that their decisions are fair and in investors' best interests. | Safeguards assets, promotes fairness, and maintains trust in the system. | RE and trustee boards should actively oversee fund operations, including valuations, conflicts, liquidity and impaired assets, to ensure fair and proper conduct. |
| 2. Organisational capability Human, financial and technological resources are adequate. REs and trustees operate efficiently, honestly and fairly. | Supports operational resilience, investor protection and regulatory compliance. | Maintain adequate staffing, systems and capital, with regular reviews as fund size and complexity grow. Ensure appropriate expertise and experience, including in credit, risk, compliance, systems support, valuation, reporting, liquidity and conflict management. Undertake appropriate monitoring and supervision, including of corporate authorised representatives. |
| 3. Transparency Investors have access to timely, transparent information on investment strategy, exposures, valuations, risks and fees. | Supports comparability and informed decision-making by investors. | Adopt consistent reporting practices and terminology, including timing, form and substance. |
| 4. Design and distribution Design and distribution practices are fair, transparent and appropriately targeted for investors. | Ensures investors receive clear, accurate information to make informed decisions, and mitigates against mis-selling of unsuitable products. | Determine an appropriate target market, taking care that it reflects any high-risk or complex fund structures or features. Strengthen distribution oversight to ensure product suitability (including via platforms). Platforms provide clear and accessible information. |
| 5. Fees and costs Fees and costs are fair and transparent, giving investors and borrowers a clear view of total costs. | Enables informed decision making and promotes trust. | Disclose all fees and income streams (e.g. management and performance fees, borrower-paid fees, origination margins, default interest). Be clear about the manager's total remuneration. Avoid complex fee and margin structures that obscure true cost to investors. |
| 6. Conflicts of interest Conflicts of interest are identified, disclosed, and effectively managed or avoided. | Promotes trust and fair treatment of investors, borrowers and other parties. | Identify, disclose and effectively manage or avoid conflicts. Avoid arrangements (e.g. fees, interest, co-investment, loan structuring) that unduly favour one party. Ensure clear and fair allocation across funds. Disclose related party transactions and multiple exposures to the same borrower with independent oversight. |
| 7. Governance Structures, processes and people promote sound decision-making, compliance and accountability. | Drives responsible decisions, supports ethical conduct, and fosters a risk-aware and compliant culture. | Establish well-defined, documented roles, decision-making and escalation processes, with clear accountability. Embed a culture of risk-awareness, compliance and transparency. Empower staff to challenge poor practices. Ensure independent oversight, with REs and trustee boards independent of the business. Avoid overly complex structures that heighten the risks of conflicts and unfair treatment of investors and borrowers. |
| 8. Valuations Valuations are fair, timely and transparent, with robust governance | Determines transaction, entry and exit prices, and can influence management and performance fees. | Implement clear and consistent valuation methodologies, policies and processes that produce fair valuations. Undertake valuations regularly (monthly or quarterly), with appropriate independence. Include periodic external audits. |
| 9. Liquidity Liquidity risk is effectively disclosed and managed, avoiding structural mismatches, with fair redemption terms aligned to portfolio liquidity. | Implement clear and consistent valuation methodologies, policies and processes that produce fair valuations. Undertake valuations regularly (monthly or quarterly), with appropriate independence. Include periodic external audits. | Disclose redemption terms, liquidity gates and stress-testing practices to investors. Ensure the source of funds for distributions is sustainable and stems predominantly from cashflows generated by underlying assets. Avoid paying distributions from investor capital or that of new investors. |
| 10. Credit risk Credit risk is effectively managed across loan origination, portfolio construction, monitoring, impairment, default and repayment. | Ensures disciplined lending, aims to preserve investor capital, supports long-term portfolio performance, and enables effective impairment and default management. | Apply standardised credit assessment and monitoring frameworks as part of a well-governed and documented risk management framework. Document credit decisions and risk ratings, and regularly review borrower performance. Establish escalation protocols for early signs of distress. Use portfolio stress tests. Apply a consistent approach to impairments, and ensure independent oversight of credit and default and impairment processes. |
The 7 areas to improve private credit practices
Private credit funds should review and improve their practices to align to the considerations outlined in each of the 7 focus areas highlighted by ASIC.
Focus Area 1. Fund disclosures and transparency
When done well | Considerations for private credit funds |
| Investors have access to timely, transparent information about portfolio strategy, exposures, risks and fees, enabling comparisons. |
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Focus Area 2. Marketing and distribution
When done well | Considerations for private credit funds |
| Design and distribution practices are fair, transparent and appropriately targeted for investors. |
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Focus Area 3. Fee and income transparency
When done well | Considerations for private credit funds |
| Fees and income structures are fair and transparent, giving investors and borrowers a clear view of total costs. |
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Focus Area 4. Governance and conflict management
When done well | Considerations for private credit funds |
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Focus Area 5. Valuation practices
When done well | Considerations for private credit funds |
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Focus Area 6. Liquidity management practices
When done well | Considerations for private credit funds |
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Focus Area 7. Credit risk management practices
When done well | Considerations for private credit funds |
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What private credit sector needs to do next
Private credit participants and individual fund operations need to act now to avoid regulatory investigation and possible enforcement action.
Private credit participants (including responsible entities (REs), trustees and investment managers) in the private credit market should adopt strong industry practices that align with the 10 guiding principles for doing private credit well.
Individual fund operations should be benchmarked against the principles and better practices in this report and REP 814, and uplift their risk management practices where there are gaps.
By uplifting private credit practices, this will improve the overall functioning of the private credit market.
