At ASIC’s annual forum in Melbourne last week, the corporate regulator and leading market participants said Australia now sits far behind global peers on disclosure and data collection, even as private capital plays a growing role in reshaping the financial system.
During a panel on the future of capital markets, ASIC commissioner Simone Constant said Australia remains “well south” of comparable jurisdictions on private market disclosure, citing fragmented reporting, limited visibility on fund positions and inconsistent data from both institutional players and emerging private wealth lenders.
“Private markets, private credit, when done well, are really good for the economy and for investors and borrowers,” Constant said. “But I do want to be really honest. There are some things that are really not being done well, and we’re really worried.”
Her comments follow ASIC’s November discussion paper on evolving capital markets and a separate thematic surveillance of private credit funds as well as its September report on private credit.
Constant said the lack of visibility over exposures and valuations means the industry’s rapid growth is increasingly becoming “its own biggest risk” - prompting the regulator to press ahead with a pilot program aimed at improving data collection.
Without stronger information flows, she warned, the risks tied to the sector’s expansion could intensify.
“We’re going to be transparent, accountable, consistent. We have said, here’s a plan. We’re going to approach this with some rigour,” she said.
“We’re listening to industry. We’ve got a pilot for how we’re going to approach it. But we do need to move on this, and that’s for the sake of system stability, and also knowing what investors are getting in and having that confidence.”
Executives from Goldman Sachs, superannuation fund Australian Retirement Trust and BlackRock, also appearing on the panel, agreed that the data shortfall has become a critical weak point, arguing that every private credit fund should benchmark itself against ASIC’s new 10 principles to lift standards and rebuild confidence among domestic and international investors.
“I think every private credit fund in the country, wholesale and retail, and this needs to be done at the fund level, needs to conduct a benchmarking exercise against the 10 principles, and document and report against those 10 principles,” CEO of Goldman Sachs Australia and New Zealand Simon Rothery said.
“We’ve certainly started that process in the private credit funds that we operate in Australia, and I think everybody should be doing that – and I think it’s incumbent upon boards and management to ensure that that happens moving forward because it’s very clear.”
Rothery said Goldman Sachs believes private credit and private markets deliver significant benefits to economies.
“Private credit sustains businesses that otherwise wouldn’t operate. In the US, it’s a big driver of the economy, it always has been, private equity in particular and now private credit - we see private credit as just, it’s in its infancy,” he said.
“We say in the US, we’re only in the first innings. There’s a long way to go. So to be able to look at this report in Australia as the market is just developing, and to be able to have a framework to put in place, I think positions us really well from a competitiveness perspective.”
He emphasised the growing importance of the sector within the broader financial ecosystem.
“I think certainly in my 30 years of banking, probably other than the creation of the superannuation industry in this country, I think we are now faced with the biggest structural change in terms of the formation of capital, particularly private capital and what that means for public markets. And it’s profound. And we see it in our business every single day,” he said.
The warnings come as capital allocation undergoes a structural shift, with private market investors now outnumbering public market investors in Australia and global funds accelerating their expansion.
As private market investment increases, global managers are moving into Australia to capture yields that remain one to two percentage points higher than those available in the US and Europe.
“We’re really keen to work with the industry and work with the regulator, and the road forward is going to be really important,” BlackRock head of Australia Jason Collins said.
ASIC’s Constant also noted the sector’s heavy concentration in property – about 60 per cent of total lending - as a vulnerability in a market yet to be tested through a full credit cycle downturn.
“I think some of the unique features of Australian private credit are probably, as we’re seeing it at the moment, our areas of concern are the greatest risk to itself,” she said.
“Property’s great, and the market is so much driven by property, but gee, that’s a concentration. And no crisis repeats, I always say that, yet you need to learn from the crises, and we do know property, and levered property lending can quickly escalate in a crisis.”
