A market coming of age

Private credit's growth has been remarkable. ASIC estimates the Australian market has expanded by approximately 500% over the past decade[1], while globally private markets have experienced similar growth. What was once a specialist corner of the investment market is now increasingly mainstream and integral to the broader financial system. Millions of Australians have exposure through direct investments, listed securities and, perhaps most significantly, through their superannuation funds.

That growth inevitably brings greater scrutiny. Every maturing market follows a similar path. Rapid expansion is followed by increasing expectations around governance, transparency, disclosure and risk management. Private credit has now reached that stage of its evolution. Seen through that lens, ASIC's recent focus should not be viewed as hostility toward the sector. Rather, it reflects a recognition that private credit has become a systemically important source of capital that deserves a robust framework of market standards.

Connecting the dots: A coordinated regulatory strategy

Many participants view ASIC's recent private credit initiatives as separate events:

1. Reports 820[2] and 821[3]
2. ASIC's 10 Principles of Private Credit Done Well[4]
3. the Bathla collapse
4. surveillance activity across retail and wholesale funds
5. valuation warnings
6. recent Design and Distribution Obligations (DDO) stop orders.

Such views are misconceived. What is emerging is a coordinated regulatory strategy focused on a single concern: whether investors genuinely understand the risks they are assuming when they invest in private credit. Drawing on our experience advising fund managers, responsible entities and investors across the private credit market, we are seeing increased focus on governance, disclosure and distribution practices as expectations continue to evolve.

The significance of the recent DDO action

The recent DDO stop orders issued by ASIC against the Remara Cash Management Fund’s three private credit-related products provide an important insight into the regulator's approach. ASIC intervened because it considered the target market determinations overstated the suitability of the products for investors seeking capital preservation, understated risk and suggested portfolio allocations that were potentially inappropriate for retail investors.

Importantly, ASIC did not challenge the legitimacy of the underlying asset class. Instead, the regulator focused on whether the products were being described and distributed in a way that appropriately reflected their risks and likely suitability for retail investors. ASIC raised concerns that the target market determinations characterised the products as suitable for investors seeking capital preservation, allocated substantial proportions of investor portfolios to the products and classified them as low-risk despite exposures that may not support those conclusions.

This intervention demonstrates ASIC's commitment to ensuring that investors receive clear and accurate information about investment products before committing capital. That objective should align with the interests of quality fund managers and advisers. Investor confidence ultimately depends on investors understanding not only the potential returns of a product but also its underlying risks.

Gadens recently acted for a private credit fund manager in relation to an ASIC DDO stop order concerning the adequacy of its target market determination. Through that engagement, including extensive discussions with ASIC and the subsequent uplift of fund documentation, we observed that many of the regulator's concerns reflected themes that had already been emerging through ASIC's private credit surveillance activities and Report 820. Viewed in that context, the Remara stop orders are less a new regulatory development and more a continuation of ASIC's broader focus on ensuring that private credit products are designed, marketed and distributed in a manner that accurately reflects their risk profile and intended investor base.

A positive regulatory agenda

Much of the commentary surrounding ASIC's recent statements has focused on enforcement. That commentary risks overlooking the broader theme emphasised by ASIC that its objective is to improve standards, transparency and investor confidence. The regulator's reports, surveillance activity and publication of the 10 Principles of Private Credit Done Well are all directed toward helping industry participants understand what good practice looks like.

Markets function best when investors can confidently assess risk, compare products and understand the basis on which returns are generated. Greater consistency in governance practices, valuations, disclosure standards and conflict management ultimately benefits those participants already operating at a high standard. Indeed, one of the consequences of stronger standards may be increased differentiation between managers who have invested in governance and risk management frameworks and those who have not.

From growth to trust

Perhaps the most interesting aspect of ASIC's recent commentary is its focus on trust. Private credit's long-term success will not be determined solely by performance. It will depend on confidence. Confidence that valuations are robust. Confidence that conflicts are appropriately managed. Confidence that liquidity risks are properly disclosed. Confidence that investment products are distributed to investors for whom they are suitable.

These are not merely regulatory objectives. They are commercial imperatives for a market that is increasingly competing for capital from sophisticated institutional and retail investors. The stronger the trust in the market, the greater its capacity to attract long-term investment.

Why this matters for boards and trustees

The implications extend well beyond fund managers.

One of the more notable themes in Commissioner Constant's speech[5], on 22 September 2026, was the emphasis placed on the responsibility of the entire private credit ecosystem, including trustees, institutional investors, valuers, auditors, ratings agencies and advisers. As private credit continues to attract larger allocations from superannuation funds and institutional investors, expectations around due diligence and oversight will continue to rise. That should not be viewed as an additional burden. Rather, it reflects the increasing sophistication and maturity of capital markets.

Institutional capital naturally seeks strong governance, reliable information and transparent risk management. These are the foundations upon which sustainable growth is built.

A competitive advantage for the industry

There is another reason private credit participants should embrace the current focus on standards. Strong governance and transparency are increasingly sources of competitive advantage. Investors are looking beyond headline returns. They are asking more detailed questions about portfolio construction, valuations, liquidity management, conflicts and underwriting discipline. Managers who can demonstrate robust processes are likely to find themselves well positioned as capital becomes increasingly selective. In that respect, ASIC's 10 Principles should not be viewed solely as a regulatory benchmark. They can also be viewed as a framework for demonstrating quality and building investor confidence.

Looking forward

There is no doubt ASIC's scrutiny of private credit will continue. Recent intervention activity, including the interim stop order issued on 8 October 2026[6] in relation to the Product Disclosure Statements for three private credit funds managed by the Australian Secure Capital Fund, demonstrates the regulator's focus on disclosure quality and transparency. Notably, ASIC's concerns extended beyond product design and distribution to the adequacy of disclosures regarding portfolio composition, diversification metrics and fund structures. This reinforces the message that regulatory scrutiny is increasingly focused on whether investors are being provided with clear, concise and effective information to properly assess risk and make informed investment decisions.

The regulator has made clear that surveillance activity, enforcement investigations and further market reviews remain ongoing. However, the bigger story is not one of regulatory intervention. It is one of market maturation. Private credit has moved from the margins to the mainstream. As that transition occurs, investor expectations inevitably rise. The most successful participants will be those that see governance, transparency and investor protection not as regulatory obligations but as essential elements of long-term commercial success. The regulator is therefore seeking to establish a new baseline of accountability to assist the ongoing integrity and robustness of capital markets.

The firms that respond now are likely to help shape the future of the sector. As expectations continue to evolve, Commissioner Constant's question remains a timely one: “If you knew what good looked like and chose not to adopt it, why not?”

Private credit remains one of the most important and innovative sources of capital in the Australian economy. The opportunity now is to ensure that growth is matched by equally strong standards. If that occurs, ASIC's recent actions may ultimately be remembered not as a constraint on the industry, but as a catalyst for its next phase of sustainable growth.

Key takeaways for private credit participants

For private credit participants, the question is no longer whether ASIC's expectations are changing, but whether existing frameworks remain aligned with those expectations. In light of the regulator's recent activity, fund managers, responsible entities, trustees and advisers should consider whether:

• target market determinations accurately reflect a product's risks and intended investor base
• product descriptions, portfolio allocation guidance and capital preservation claims are appropriately supported
• valuation, liquidity and conflict management frameworks align with emerging better practice standards
• governance arrangements provide sufficient oversight of product design and distribution
• disclosure materials enable investors to make informed decisions about risk and suitability.

For many participants, these developments will reinforce existing practices. For others, they may present an opportunity to review and strengthen governance, disclosure and distribution frameworks before regulatory scrutiny arises.

Authored by Susan Goodman

[1] REP 823 Advancing Australia’s evolving capital markets: Discussion paper response report | ASIC

[2] Report REP 820 Private credit surveillance: retail and wholesale funds

[3] Report REP 821 Private capital market reporting: Global practices and lessons

[4] REP 823 - Principles for private credit funds done well - pp26-28

[5] The case for private credit standards: if not, why not? | ASIC

[6] 26-234MR ASIC halts offers in mortgage schemes managed by Australian Secure Capital Fund | ASIC