Check against delivery

Thank you, Dom, for the introduction, and for the invitation to speak about ASIC’s private credit work here today.

I’d like to begin by acknowledging the Traditional Custodians of the land on which we meet today, the Wangal people of the Eora Nation and pay my respects to their Elders past and present, extending that respect to all Aboriginal and Torres Strait Islander people here today.  

I would also like to acknowledge CAFBA. As Dom said CAFBA have been working with us for some time now in this space and I’d like to acknowledge CAFBA and our venue for hosting today.  It’s an auspicious venue actually for golfers in my family, but as I am absolutely hopeless at golf, I will instead focus on the serious and very important topic of private credit.

So, if timing is everything in markets, then well done CAFBA. Today’s discussion about what we are seeing unfold in private credit couldn’t have been better timed.

The events surrounding the collapse of Bathla are certainly deeply concerning, but for ASIC, unfortunately, they’re also not surprising.

We’ve been talking about private credit, as you’ve heard from Dom, for a long time now – specifically about the risks stemming from inconsistent industry standards that haven’t kept pace with the growth, significance, complexity and connections of the sector.

We’ve always said that private credit done well has a valuable place to play in our financial system.

Of course, it complements the banking system and provides opportunities for investment and growth in this capital hungry era.

But it must be done well.

Our work has shone a light on the weaknesses in private credit, but despite our ongoing calls for improvement across the sector, too many have been too slow to respond.

And what we’re seeing now, as some of those weaknesses are tested at scale for the first time in current conditions, are the first significant cracks – the first stress fractures – beginning to emerge.

To avoid these stress fractures becoming a stressed system, the sector must lift its standards and maintain them, consistently.

We need to see fund managers return to the foundational principle of true stewardship of the money entrusted to them.  

And we need to see everyone entrusted with an important role in this investment chain – from fund managers, deal underwriters and trustees right through to valuers, auditors, ratings agencies – all of them consistently meeting their responsibilities too.  

Given the size of funds management in Australia and the scale of growth of private credit, whether we are in a test, a stress or something more, this call to action on compliant, appropriate standards is one of significance.

No crisis repeats, but those of us, like Dom and I, old enough to have lived through several will know that the lessons they teach you are evergreen.

So, this morning, I’m going to share with you what ASIC has done in private credit, what we’re seeing, and what comes next.

The growth of private credit

Private markets – and private credit in particular - has grown rapidly in Australia thanks to the prolonged period of global liquidity.

One estimate has the sector growing domestically by 500% over the decade.¹

And of course, Australia is not alone here. Globally, funds under management have quadrupled in a similar time frame² and it’s estimated there are now more private equity funds in the US than there are McDonald’s stores.³

But governance, controls and underwriting standards have not kept pace with this growth.

In many ways, it’s a sector that tried to run before it could walk. 

So, today, millions of Australians are exposed to private credit – some through direct fund investment, others through shares in private credit fund managers, but many through their superannuation fund.  

Now, where superannuation funds allocate assets prudently and where the private credit investments themselves are done well, this is a great thing for investors, borrowers and the economy.  

But against the backdrop of super’s significant growth in funds under management and what feels like exponential growth in private credit, ASIC's focus on the sector should come as no surprise.

When there is too much inconsistency in standards in a market of this scale, ASIC will maintain and continue to sharpen our focus on the sector.

Testing times

In a sense, although we have been at this for a fair while now, it also feels like we are actually just in time when we look at external movements this year.  

As Dom mentioned, strategic risk is heightened and, as I’ve said, this was not unexpected.

We’ve seen bond yields, again as Dom mentioned, continuing their upwards trajectory, increasing the cost of borrowing and impacting valuations and investor returns.

Very recently, the US 10-year and 30-year government bond yields briefly hit highs not seen since 2007, while Australian bond yields climbed to a 15-year-high.

Internationally, we’ve seen a reassessment of technology and software-related valuations, record-high credit default swaps, and increasing redemption requests and loan defaults.

The giants of the AI chain - from creators and hyperscalers to chip makers, cloud providers and data centre operators - are turning to debt and equity markets to fund the capex supercycle, driving up expectations of hundreds of billions of dollars in future bond issuance.

And of course, when the corporate bond market is exhausted, where will people turn? Private capital.

Domestically, we’re seeing a slowing of the housing market with flow-on effects to the property and construction sector.

And as we’ve seen with Bathla, developers with exposure to private credit are particularly vulnerable when economic conditions become more challenging. It’s one of the reasons why good governance, effective controls and industry standards are crucial.

Some have argued that the distinctive nature of Australia’s private markets – in particular our greater exposure to real asset-backed loans in construction and property that we’ll talk about today – that these would shield us from the stresses seen overseas.

The developments of the past few weeks have put that case to rest. As we have continued to reiterate, difference is not a defence. Only good standards are.

Future-proofing private credit

Which brings me to ASIC’s work to future-proof the private credit sector.

Over the past 18 months, ASIC has intensified its scrutiny of private credit, beginning with our discussion paper on public and private markets.

We’ve taken a very deliberate, staged, evidence-based approach to this work – and thank you to Dom for acknowledging that – and it started with a deep dive into private credit by independent finance experts Richard Timbs and Nigel Williams.

That was certainly illuminating.

It gave us – arguably for the first time – a deeper understanding of the size and nature of private credit in Australia and the operating practices that existed.

It highlighted that concentration of private credit in real estate development.

And it demonstrated the varying practices across the sector.

Now the poorer practices – opaque remuneration and fee structures, inadequate governance arrangements, poor valuation practices, ineffective disclosure – these were concerning and demanded scrutiny which came through two ASIC reports.

The first documented the findings from a surveillance of 28 private credit funds – Report 820 – an absolute landmark report for ASIC, released almost a year ago.

It painted a seriously concerning picture.

So for a snapshot, of the 28 funds we reviewed – 14 wholesale, 14 retail:

• Only four published information about the interest rates or ranges charged to borrowers.
• Less than half had detailed credit or impairment and default management policies in place.
• Most funds did not have adequate separation between those approving loans and those responsible for independently assessing their ongoing performance and value.
• And of the wholesale funds, only two performed stress testing as part of their liquidity risk management.

These were clearly red flags, particularly when we think – and this is a room that understands this deeply – when we think about the critical risks to be managed in private credit – credit and liquidity risk, and the fundamental importance of course, of effective disclosure when we’re seeing such a widespread growth in the sector.  

And this is even before we turned to the canyon-wide variations in definitions of mission critical terms like “default” or the complexity of some structures which, now in the case of the borrower structure of Bathla, has resulted in a corporate group with almost twice the number of special purpose vehicles as employees – and it may be more.

So, the second report - Report 821- assessed private market reporting practices globally.

Unfortunately, it found that Australia falls well south of the line of information and disclosure of other comparable jurisdictions like Singapore, the US, the UK and even Switzerland – far more famous for its chocolate than its disclosure regimes.

Even Switzerland ranked ahead of us when it came to the quality standard of private market disclosures.

So together, these reports laid the foundation for our ongoing work towards stronger standards, improved transparency and better supervision of private markets. 

And importantly they feed into our broader efforts to improve the standards across the entire private markets value chain. This includes:

• our action against failures to properly lodge transparent financial reports,
• our warnings to refresh valuations using current data and match fit assumptions, and
• our calls for higher standards in conflict management and in financial reporting and audit.

And as a starting point, we articulated a set of 10 principles of private credit done well - to assist industry in understanding ‘what good looks like.’

Now, our expectation is that firms use these principles as a practical benchmark for self-assessment and uplift.

And we expect boards and investment committees to consider how funds measure up against them and to embed the 10 principles into their decision-making.

And so, I ask the question of the room:

• How many of you have discussed these principles in your own boardrooms or investment committees?
• How many of you have embedded these into your own decision-making?
• And if not, why not?

Our work – including ongoing surveillances, stop orders, referrals to enforcement, consistent monitoring and enhanced guidance - is all about lifting those standards of practice across the sector.

As a regulator, we can’t be everywhere, all at once. And certainly, we hear the call for measured and proportionate regulatory action. There are practical and regulatory limits to our remit – especially when it comes to wholesale funds.

Which makes industry standards - your standards - so important.

The incentive to get things right is not just regulatory – it’s commercial as well.

Get things wrong and you could be facing disputes and litigation – and your boards will be wishing they’d included private credit principles as a standing item on their agenda.  

And, as was foreshadowed this morning, if the industry gets things wrong at a systemic scale, history tells us there is likely to be law reform of similar magnitude.

So we expect all participants across the private credit eco-system - from boards to brokers - to assess their practices against ASIC's 10 principles and lift those standards where needed.

As you’d expect, we’ll continue to follow this sector closely, including a second tranche of surveillance which is due very soon, and a follow-up pulse check to gain insights into things like redemptions and valuation changes on local funds.

The significance of property lending

So, any discussion of private credit in Australia has to include property lending – and not just because it’s the focus of this event, but because real estate lending makes up between 40% to 60% - or potentially more - of private credit⁴ in this country.

Some have suggested that property might be the weakest link in private credit in Australia.  

Ok, the risks are self-evident. We heard them this morning. Property development and construction lending is vulnerable to a wide range of factors - inflation, escalation in costs, project delays, interest rate rises, refinancing conditions, and unrealistic asset valuations.

You know them as well as we do. But it’s not property that’s the weakest link – it’s poor practices.

When it comes to property, you can – and you know this well – you can manage those exposures through cycles with the right deal selection and due diligence, the right credit and counterparty concentration risk management, solid portfolio diversification, and liquidity and capital buffers.

It will never be risk-free. We don’t expect it to be - but we do expect those risks to be properly managed and appropriately disclosed with fair treatment of investors.

More than a compliance issue

What we’re talking about here is more than a compliance issue and the cost of failure goes well beyond balance sheets.

Of course, when property projects stall and credit vehicles freeze redemptions, the damage falls squarely on the real economy.

Contractors and trade subcontractors are left unpaid, homebuyers face the distressing prospect of losing their deposits, and superannuation members find their retirement savings locked away.

The damage also falls on investors.  

Some of these investors - through structuring, hidden leverage or complex liquidity management practices - may find themselves exposed in ways they did not understand or could not have anticipated.  

In fact, some private credit experts we have worked with over the past 18 months agree that for some funds, even the most sophisticated investors could not really be sure what they were exposed to and how it would respond to a test.  

So this is why we have repeatedly called for effective disclosure and consistency of terms.

When things go wrong, it’s actually the impact on investors and that human cost that keeps ASIC commissioners up at night – and it’s what drives our consistent push for private credit to lift its standards.

It’s why we developed the 10 principles of private credit done well.  

It’s why we will continue to undertake that pulse check on a regular basis.

And it’s why poor private credit practices are an enforcement priority for ASIC with investigations underway.

Inconsistent standards of practice

So, what are we seeing across the sector?

Well, pleasingly, we have seen signs of constructive engagement with ASIC’s findings and guidance to date. But we worry it will be too little, too late, if we don’t see a move with urgency to lift practices across the sector.

As we continue to see issues around valuations, liquidity, governance, conflicts and transparency.

Basic things like inconsistent definitions mean even experienced investors can struggle to evaluate risk and compare funds.

So the time to strengthen standards is now before there is a loss of trust. And I think that was even the call from your board members this morning.

The Financial Services Council released its Private Markets Best Practice Standards in August.

And we absolutely welcome the leadership the FSC has shown in this regard.

It’s a really constructive first step.

The next step is for other industry associations to develop and adopt their own compliant, good practice standards and of course for members, including member funds, to sign up to them.  

But even without the associations, our roadmap is there.  

If you are a private credit fund who hasn’t assessed yourself against the 10 principles of private credit done well that we published, again ask yourselves - why not?  Before your investors do.

Because the clock is ticking. Whether we see broader credit stress or not, certainly the tide is going out on poorer private credit practices.

The collapse of Bathla reinforces why strong governance, effective oversight, clear disclosure and accurate valuations are critical.

We challenged the sector to lift standards by 2027 – and that’s only three months away.

So as an industry, you need to drive this change – because if you don’t, again, as foreshadowed this morning, ASIC may be forced to do it for you, through regulatory and enforcement action.

So everyone has a responsibility here.

Fund managers need to review loan portfolios and apply realistic, independent valuations.

Carrying distressed loans at full face value to protect management fees is unacceptable.

We drew a line in the sand on that in June for asset valuations to be refreshed. Managers who continue to avoid write-downs will face direct regulatory attention.

The structural liquidity mismatch built into many debt funds must also be resolved.

Offering regular redemptions to investors while holding illiquid, multi-year property loans creates a fragile product design that breaks down under pressure - especially when coupled with loan “management practices” that rearrange the deck chairs while the tide goes out and the boat risks running aground. 

Managers must provide complete clarity regarding borrower arrears, interest capitalisation, developer exposures, and the exact rules governing redemption queues.

Now, institutional investors and superannuation trustees, they have a role to play too.

They can’t treat private credit as an easy, high-yielding substitute for traditional fixed-income investments while accepting manager marks at face value.

Trustees have clear statutory obligations to act in their members' best financial interests.

Fulfilling that duty requires genuine, look-through due diligence.

Trustees must look past the headline returns, examine the underlying collateral, verify the bad-debt provisioning, and independently test those manager assumptions before committing member capital.  

It actually really continues to surprise me when CIOs of very large, sophisticated trustee funds are reluctant to ask their own fund managers whether they’re meeting our 10 principles of “private credit done well”, and this is especially the case when most of those principles can be extended more universally across private markets and when actually, most of those standards are what we think those trustees already expect of themselves.  

Why wouldn’t you ask “if not, why not” of your own external fund managers as a CIO, particularly when you are accountable to your members for that fund manager’s success or failure.

And particularly when the scale and significance of superannuation funds under management can drive better practices across the market.

And valuers, auditors and ratings agencies have a role.

They need to ensure valuations reflect reality, risks are recognised early, and investors can have confidence that the information and the assessments they are relying on are sound.

So ASIC has made clear what good practice looks like.

We are now well beyond warnings.

The sector should prepare for enforcement action.  

We put it on notice in terms of 30 June valuations - and now we need to see the practices lift.  

We have multiple enforcement investigations underway. 

We are undertaking active surveillances across wholesale and retail funds.

We’ll publish the findings of our surveillance in the coming months but, regrettably, it’s already clear that practices are not where we need them to be.

We continue to observe recurring themes, including those complex structures and incentive arrangements raising concerns about the effective management of conflicts of interest.

Related-party arrangements, SPVs and remuneration structures – these can all create conflicts.

In the broader setting we’re concerned that they’re not being adequately identified, managed or disclosed. Of course, we see the damage these complex arrangements can cause when we try to look through the live example of the unfolding Bathla situation - where $3.4 billion from around 40-plus lenders that we know of, was being funnelled through around 540 SPVs that we know of so far.

And – despite our report emphasising the importance of transparent fee and cost disclosure, and distribution practices that support product suitability - we are still seeing issues in these areas. 

Conclusion

So, I mentioned at the start of my remarks that we need to see fund managers return to the fundamental principle of true stewardship of the money entrusted to them.

That means remembering whose money it is - and managing it prudently and transparently.

It means honest valuations, rigorous governance, effective management of conflicts, clear disclosure of risks, and a willingness to make difficult decisions when loans deteriorate, rather than protecting fees or appearances.

The stress fractures we're starting to see represent a line in the sand for private credit.

As we have consistently said, private credit - done well - has an important part to play in Australia’s growth and productivity, in driving that forward. But trust in the sector depends on high standards and best-practice principles.

So, all of you involved - lenders, brokers, managers, auditors, trustees, responsible entities – ask yourself now: have you embedded ASIC’s 10 principles of private credit done well?

And if not, why not?

 

^[1] REP 823 Advancing Australia’s evolving capital markets: Discussion paper response report | ASIC

^[2] IMF 2024

^[3] Attributed to Alisa Wood, KKR Partner, CEO of Private Equity at Bloomberg's Women, Money and Power event, 1 October 2025

^[4] Private Credit Spotlight - 2025 Themes and 2026 Outlook - Mills Oakley