AusBiz: Regulators aim to keep private credit above board

Key Points:

• Growth in private credit allocations among ultra-high-net-worth investors
• Regulators are focusing on liquidity alignment and valuation integrity
• Ongoing push for clearer standards and stronger transparency across the sector

Brett Craig discusses the increasing regulatory attention on private credit, noting that allocations within ultra-high-net-worth portfolios have risen from around 3% to 7%. He explains that the rapid expansion of the asset class, combined with isolated cases of poor practices by some managers, has been a major catalyst for deeper regulatory interest. Craig contrasts this with the US market, where tighter spreads have pushed some managers toward higher risk, while Australia has largely maintained quality underwriting and experienced comparatively low default rates.

On liquidity, Craig emphasises that fund redemption terms must accurately reflect the liquidity profile of the underlying loans to avoid situations where investors cannot exit their positions. Regulators are now looking for clearer, more consistent valuation methods that reflect true realisable values, with further guidance expected over the next 18 months.

Craig also highlights the need for improved disclosure and regular reporting so investors can better understand performance, structure and risk. He welcomes ASIC’s increased supervision, viewing stronger regulation as a positive development that enhances comparability across funds and supports investor protection as the market continues to grow.