ASIC sharpens focus on private credit lending in commercial real estate
ASIC sharpens focus on private credit lending in commercial real estate
ASIC’s focus on private credit is a key theme for 2025 as the regulator reviews private markets with an eye to ‘improving transparency’. Part of this sharper focus on private credit lending includes issuing notices to retail private credit managers.
In a recently released Key Issues Outlook 2025, ASIC announced increased surveillance of retail private credit:
“We are also increasing our focus on private markets through our surveillance work: as part of this work ASIC will review the governance processes and practices of a sample of responsible entities of retail private credit funds, including their asset valuation and liquidity management practices.”
This is in line with ASIC’s 2024-2025 Corporate Plan, which said a strategic priority is to drive consistency and transparency across markets and products, where ASIC mentioned rapid growth in private credit and private equity.
ASIC chair Joe Longo was quoted in an ASIC media release as saying: “While Australia’s private markets are dwarfed in size by our listed equity markets, their opacity presents an outsized risk to market integrity, particularly as more investors become exposed.
“The addition of a new strategic priority aimed at driving consistency and transparency across markets and products puts all market participants on notice.”
ASIC can issue notices to retail private credit managers
ASIC has the power to issue private credit managers and funds with notices under section 30 of the Australian Securities and Investments Commission Act 2001 (Cth), requiring the production of books.
Such notices may require organisations to produce certain documents to ascertain compliance with the Corporations Act 2001 (Cth). Documents which may need to be disclosed include marketing material for the fund, valuation policies, related party transactions, and/or conflicts of interest policies, policies regarding on-lending arrangements, and the assessment of borrower’s credit risk, and policies illustrating how the assets and operations of the fund are managed.
ASIC may also issue entities with a Notice of Direction under section 912C of the Corporations Act 2001 (Cth). This notice may direct the organisation to obtain and provide an audit report prepared by a person nominated by ASIC.
Information which may need to be declared to ASIC may cover details of the fund, including:
The total principal amount of all outstanding loans
The number of borrowers, transactions or loans involving related parties of the licensee
Details of the committees the licensee has established to oversee compliance with the Fund’s policies
Particulars of how the fund determines the relevant interest rate payable to investors
General information about how the origination team referenced in the fund’s PDS operates.
ASIC may also want details regarding distribution:
How interests in the fund have been sold to clients during the relevant period
Channels through which interests in the fund are sold, including the proportion of investments made through a financial advisor
The assessment process entities have implemented to ensure investors are in the target market in accordance with the fund’s target market determination
Due diligence and risk assessment:
How the fund/underlying syndicates select borrowers and assess the borrower’s credit risk
Descriptions of the policies and procedures applicable to the fund about the loans to be made or securities to be invested in
Steps the licensee will take when funds do not conform to these policies
Other details include how the licensee manages conflicts of interest, particularly around related party transactions.
Information regarding credit risk and capital protections will also attract interest, including:
How the fund and underlying syndicates manage interest rate risk
Whether the fund itself has entered into any borrowings
Any restrictions the fund has imposed on loans to be made
Liquidity and redemption issues are also important, including how the fund manages liquidity risks. Details on how limitations on withdrawals are determined, and by whom, along with the period required for withdrawals to be paid, will need to be provided.
If you have any questions for the PFA Issues & Regulatory Committee, please contact us at pfa@propertyfunds.org.au