ASIC’s Roadmap to Private and Public Markets – Implications for the Managed Investment Scheme Industry

[co-author: Joanna Bird]

1 Introduction

On 5 November 2025, ASIC announced the publication of its roadmap to promote strong, efficient, and globally competitive capital markets in Australia. The roadmap is outlined in report Report 823 titled “Advancing Australia’s evolving capital markets: Discussion paper response”, which seeks to address opportunities for the Australian public and private markets, as well as tackling emerging risks.

ASIC has stated that it wants to be a backer, not a blocker, of investment and capital and Report 823 sets out initiatives to encourage investment such as encouraging market operators to revise listing rules and streamline the IPO process. Accordingly, Report 823 and the initiatives contained in it, have wide-ranging implications for the public and private sectors, including the credit markets.

Report 823 also sets out ASIC’s findings on the current practice of operators in the private credit funds sector, and ASIC’s proposals for enhanced regulatory oversight and law reform in the wholesale funds sector, which are the focus of this article.

Report 823 builds on, and cites the findings from:

• a report, commissioned by ASIC, by Nigel Williams and Richard Timbs, titled “Private credit in Australia” Report 814;
• a report by EY Parthenon on international approaches to private markets reporting Report 821; and
• a report by Dr Carole Comerton-Forde on the forces shaping the future of Australia’s capital markets Report 822.

Report 823 also reflects upon the findings from ASIC’s surveillance report into the private credit sector Report 820. Report 820:

• identifies a wide range of practices in the private credit sector, particularly with respect to disclosure and reporting to investors in private credit funds; and
• outlines ASIC’s ‘principles for private credit done well’.

We have highlighted some key areas of poor practice in the private credit fund market, and summarised ASIC’s principles of good practice, in section 2 below.

As a result of the perceived risks, and some poor practices identified by ASIC, in the private credit funds sector, Report 823 sets out a range of future measures that ASIC considers necessary to ensure the continued integrity of the private markets, including the wholesale funds market. We have summarised these key initiatives in section 3 below.

2 Private credit surveillance and practice

Report 820 sets out ASIC’s findings from its surveillance of 28 private credit funds, including listed, unlisted, retail and wholesale funds, and builds on the analysis undertaken by Nigel Williams and Richard Timbs, set out in Report 814. The report highlights the following examples of poorer practices in the sector:

1. inconsistent and unclear reporting and terms, masking portfolio risks and challenging investor decisions – examples included a lack of detailed information on the composition of portfolios, weaknesses in reporting defaults, inconsistent definitions of what amounts to a default, and actively downplaying risks in disclosure documents, resulting in investors being less well-informed on the risks associated with the relevant fund;
2. opaque interest margins and fee structures, obscuring the risk and cost to investors – examples included a failure to quantify the interest rates being charged to borrowers, the proportion of any interest margins the manager retained, the rights for the manager to retain origination or default-related fees, making the overall cost of an investment in the fund difficult to ascertain and (as a result) difficult to compare against other funds in the sector;
3. weak governance and poorly managed conflicts of interest, risking harm to investors and confidence – examples included a lack of clarity on how assets are allocated among different investment funds operated by the manager, with ASIC suggesting that more independence was needed on trustee boards, and that better disclosure on conflicts processes was needed;
4. poor valuation practices, impacting entry and exit prices, performance and fees – examples included inconsistent approaches to key valuation concepts such as loan-to-value ratios. ASIC also suggested that there needed to be more independence over valuations, particularly where valuations were relevant to the calculation of management and performance fees; and
5. inadequate practices in key risk areas, indicating poor preparedness for stress scenarios – ASIC reported that only 2 of the wholesale funds reviewed performed stress testing as part of their liquidity risk management.

In Report 823, ASIC outlines principles for what they consider to be sound private credit practices, which they say are also relevant to wider private markets. These principles cover:

6. The responsible entity and trustee boards, as stewards of other people’s money, actively overseeing fund operations.
7. Maintaining, and regularly reviewing, adequate organisational capability such as adequate staffing, technology and capital.
8. Providing transparency about investment strategy, exposures, valuations, risks and fees, so that investors have access to the information they need and more consistent reporting practices and terminology.
9. Ensuring design and distribution practices are fair, transparent and appropriately targeted for investors, reflecting any high-risk or complex fund structures or features.
10. Disclosing all fees and costs in a way that gives investors a clear view of total costs and the manager’s total remuneration.
11. Identifying, disclosing and managing (or avoiding) conflicts of interest.
12. Governance structures, which drive a responsible, compliant, risk aware and compliant culture and include independent oversight.
13. The need for clear and consistent valuation methodologies, policies and processes, regular valuations and periodic external audits.
14. Disclosure and management of liquidity risk, avoiding structural mismatches, with fair redemption terms aligned with portfolio liquidity.
15. Effective management, with independent oversight, of credit risk by applying standardised credit assessment and monitoring frameworks, documenting credit decisions and risk ratings, regularly reviewing borrower performance, stress testing, and applying a consistent approach to impairments.

3 ASIC’s plans for the private funds sector

In Report 823, ASIC sets out its roadmap for the next 12 to 18 months, which comprises a range of further surveillance, enforcement action, additional or revised regulatory guidance and lobbying Government and industry bodies for reforms to legislation and practice. We have set out below some of the key highlights from ASIC’s roadmap.

1. Further surveillance of the funds management sector and, in particular, on private credit funds, with a focus on:
   • fees, margin structures and conflict of interest management in wholesale private credit funds, including those with a focus on real estate lending; and
   • distribution of private credit funds to retail clients through direct and advised channels.
2. Taking enforcement action for breaches of the relevant laws, with a view to deterring future misconduct.
3. ASIC guidance – ASIC plans to release:
   • an update to RG 181 Licensing: Managing conflicts of interest, with examples relevant to private markets;
   • an update of Information Sheet 251 AFS licensing requirement for trustees of unregistered managed investment schemes to reflect the full Federal Court’s decision in ASIC v BPS Financial Pty Ltd (2025) FCA 74 on the licensing exemption for authorised representatives;
   • a catalogue summarising funds managers’ legal obligations and related ASIC guidance; and
   • revised managed funds regulatory guidance to reflect ASIC’s recent surveillance findings, current regulatory risks and to provide clearer guidance for wholesale funds.
4. Possible law reform
   • ASIC has recommended the following reforms for consideration by Government:
     • requiring wholesale fund operators to notify ASIC of wholesale funds in operation;
     • extending the retail funds requirement for annual audited financial reports to include wholesale funds; and
     • amending the wholesale client tests to increase the current financial thresholds. There have been several consultations in relation to the wholesale client tests in the last couple of years, culminating in the Senate Committee concluding in February 2025 that it was not persuaded that the thresholds for the asset, income or product value limbs of the wholesale client test should be increased, but recommending that the government consider establishing a mechanism for a periodic review of the operation of the wholesale client test, engaging and consulting with Australia's investment industry. We previously reported on the Senate Committee’s inquiry report here.
   • ASIC will also engage with Government on the following reform ideas:
     • extending the statutory duties applicable to responsible entities in Chapter 5C of the Corporations Act 2001 (Cth) to include operators of wholesale funds; and
     • requiring retail and wholesale fund operators to notify ASIC and investors of significant events on a timely basis (including when redemptions are suspended).
5. Greater use of data
   • ASIC considers that it does not have sufficient data on the wholesale funds market to adequately regulate the sector, particularly when compared to the reporting obligations of fund operators in other comparable jurisdictions.
   • ASIC believes that gaps in available data limit ASIC’s visibility into fund conduct, capital markets dynamics, and potential responses of private capital in stress scenarios.
   • ASIC has repeated its call for law reform to mandate the provision of managed investment scheme data to ASIC, and has stated that it believes regulators need access to high-quality data, including:
     • information relating to each wholesale fund, such as the investment strategy, investors, assets under management and third party service providers; and
     • fund-specific information, such as fund flows, underlying assets, key counterparties, distributions, fees, performance, leverage and redemptions.
   • In advance of any law reform, ASIC will conduct a data pilot with a small sample of retail and wholesale funds and make greater use of existing data sources.

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