In its submission to the regulator’s capital markets discussion paper published in February, the Financial Services Council (FSC) pushed back against any additional regulatory burden on APRA-regulated super funds, telling ASIC they should retain maximum flexibility to allocate capital across public and private markets to deliver strong retirement outcomes.
“The FSC recommends that any regulatory enhancements for retail investors should not apply to APRA-regulated superannuation funds and other institutional investors,” the FSC said as part of its 67 recommendations, noting that funds are already subject to a “high degree” of regulation.
A significant focus of ASIC’s paper was the growing use of private markets by superannuation funds, with the regulator warning it is concerned these assets are becoming increasingly embedded in the structure of the Australian economy.
However, the FSC argued that unlocking diverse capital sources is key to boosting productivity and prosperity, and highlighted that private markets are woven into the super system given their income strength and low correlation with other assets.
As such, it said ASIC should back a regulatory framework that allows super funds to invest in private markets, including private credit, as part of building diversified, income-generating portfolios.
The council also urged the regulator to align any changes to private market valuation requirements within super funds with APRA’s existing SPS 530 framework to avoid regulatory duplication and disruption to fund operations.
Additionally, it said ASIC should strengthen disclosure expectations for fund managers around liquidity risks and performance reporting to better support platform trustees in meeting their investment governance duties.
It also urged the regulator to set clearer guidance on valuation processes and liquidity risk disclosure for open-ended funds available to retail investors, arguing these changes should be formalised in updated regulatory guides.
On private capital in particular, the council said it supports super fund participation in private credit, viewing it as a vital tool for building long-term, income-generating and diversified portfolios.
“Superannuation funds are particularly well-suited to investing in private credit, due to their long-term horizons and stable net inflows,” the FSC said. “Increasing allocations to private credit supports retirement adequacy and broader economic activity, particularly in areas underserved by traditional bank lending.”
Last month, super funds doubled down on their support for private markets, arguing these investments are not just necessary, but critical for long-term financial stability.
Speaking at an event in Melbourne, John Pearce, chief investment officer at UniSuper, described private market investments as “volatility laundering”, explaining that moving assets from public to private markets shields retired members from harmful market swings.
He acknowledged that retail investors may have valid concerns about the opacity of private markets, but argued that institutional investors, like UniSuper, are well-equipped to price in those risks, including illiquidity and opacity.
“We understand opacity, we understand illiquidity, we understand pricing, so these factors are all taken into account when we actually price the asset,” Pearce said.
HESTA’s chief investment officer, Sonya Sawtell-Rickson, echoed similar sentiments, defending private market governance and asserting that transparency in private markets can often surpass that of public markets.
“You can actually get better insights, better governance, you can have board appointments … so I feel we often have better transparency,” Sawtell-Rickson said.
Since then, the fund has published its formal submission to ASIC in which it reiterated Sawtell-Rickson’s words.
On the topic of governance in private markets in particular, HESTA stated that “appropriate and adequate levels of governance and information exist and are shared with investors”.
Tread carefully
Overall, the FSC urged a cautious approach, focused around investment governance and transparency, rather than wholesale reform, which it said, would stifle an important sector and deter capital flows into Australia.
“Our recommendation is that private markets lower systemic risk and add resilience to the economy, by diversifying available sources of capital for Australian companies, can strengthen investment returns, and are often better matched to the pension needs of retirees,” CEO Blake Briggs said.
FSC did, however, recommend enhancements to governance around valuations, including a separation of investment teams from valuation committees.
It also suggested lifting the frequency of valuations to at least quarterly and setting pre-determined re-valuation triggers.
Moreover, the council recommended that investment funds should retain flexibility to design their fee structures based on the nature of their investment products but should continue to be required to clearly disclose how fees are calculated.
On public markets – an area ASIC is trying to make more attractive – FSC argued “high regulation” has contributed to their underperformance compared to private markets.
The council’s key recommendations include simplifying existing regulatory requirements to reduce the compliance burdens associated with being publicly listed, rationalising the civil penalties regime, and reforming the public corporate debt market to make investments more accessible to retail investors.
On penalties, in particular, the FSC said the government should reform the regime to reduce the risks associated with listing while maintaining high standards of market conduct.
‘Thoughtful’ feedback
Earlier this month, ASIC deputy chair Sarah Court acknowledged the quality of the feedback received in response to the regulator’s paper, describing some submissions as “really good, thoughtful and helpful”.
Speaking at the ASA Investor Conference 2025, Court reaffirmed that the regulator is “genuinely consulting” and now carefully reviewing a broad range of perspectives gathered during the consultation period, which officially closed on 28 April.
Court reiterated that ASIC is not seeking to impose heavy-handed regulation on private markets but is aiming to deepen its understanding of what she called an inherently “opaque” sector.
“We’re certainly not saying we need to go heavy-handed regulation in private markets, but as private markets, private credit increases, we are concerned about the lack of transparency in those markets,” she said.
“We see some risks, opacity, conflicts, valuation uncertainty is a really big one. These are some of the risks we are exploring and asking about.”
Court also addressed recent public debate around ASIC’s involvement in private markets, suggesting the regulator would be criticised for inaction if it failed to act ahead of a potential crisis.
