Key Takeaways
- • ASIC published REP 846, 'Private credit funds: Do investors know what they're getting?', on 10 November 2026, setting out findings from surveillance conducted between November 2025 and August 2026 across 12 retail private credit funds, 12 wholesale credit funds, and advice given to 46 retail clients on 6 private credit funds.
- • The surveillance led to two product disclosure statement (PDS) interim stop orders and four design and distribution obligations (DDO) interim stop orders, all of which were revoked after the PDSs and target market determinations were amended.
- • ASIC found that 10 of the 12 surveilled retail private credit funds had poorly designed target market determinations, including broad or unclear risk ratings and inappropriate allocation recommendations.
- • ASIC considers it 'better practice' for managers to disclose borrower fees and other economic benefits retained from lending activities, and warns that poor private credit practices remain an enforcement priority.
- • ASIC expects to consult in early 2027 on expanding RG 45 from mortgage schemes to all private credit funds and on a proposed definition of 'private credit fund'.
Summary
On 10 November 2026, the Australian Securities and Investments Commission (ASIC) published REP 846, titled 'Private credit funds: Do investors know what they're getting?'. The report, summarised by Herbert Smith Freehills Kramer, presents findings from surveillance conducted between November 2025 and August 2026 covering 12 retail private credit funds, 12 wholesale credit funds, and advice provided to 46 retail clients in relation to six private credit funds. The surveillance resulted in two product disclosure statement interim stop orders and four design and distribution obligation interim stop orders, all of which were revoked once the PDSs and target market determinations (TMDs) were amended.
REP 846 follows ASIC's earlier private credit reports, REP 814 (Private Credit in Australia, September 2025) and REP 820 (Private credit surveillance: retail and wholesale funds, November 2025). ASIC acknowledged that some managers had strengthened compliance and governance since those reports, but considers many of the issues identified in REP 820 remain prevalent. The regulator warned that funds should not wait for regulator engagement before improving practices. The report identified that complex, multi-layered structures obscured exposures, fees and competing interests; that economic benefits generated from investor capital and retained by operators or related parties were not always clearly disclosed; that some retail distribution practices did not adequately communicate risk; and that higher portfolio concentrations were associated with a greater likelihood that advisers failed to demonstrate compliance with the best interests duty.
On marketing, ASIC flagged inadequate disclosure of underlying asset features, performance-focused material lacking balance, inconsistent promotional content, overstated liquidity (including '24/7 access to your money'), and terminology that understated risk or evoked cash products such as 'at call' and 'savings account'. On TMDs, ASIC noted that three quarters of reviewed retail funds recommended conservative allocations of up to 25% of investable assets, but warned that excessive allocations may lead to overexposure and that broad allocation classifications and overly low risk ratings undermine TMD appropriateness.
On fees, ASIC stated that borrower fees retained by managers, although legally payable by borrowers to lenders, represent an economic benefit derived from investor-funded lending and may reduce investor returns. It considers clear disclosure of their nature and quantum to be better practice. ASIC also set out expectations on conflicts of interest between Related Funds, including disclosure of inter-fund transactions, pricing of asset transfers, and conflicts arising when multiple Related Funds hold the same underlying loan.
Looking ahead, ASIC expects to consult in early 2027 on revisions to regulatory guidance, including proposing to extend Regulatory Guide 45 beyond mortgage schemes to all private credit funds and to define 'private credit fund'. ASIC also continues to advocate for expanded data collection powers, noting that Treasury released a consultation paper on the subject in September 2026. The regulator reiterated that poor private credit practices remain an enforcement priority.
REP 846 follows ASIC's earlier private credit reports, REP 814 (Private Credit in Australia, September 2025) and REP 820 (Private credit surveillance: retail and wholesale funds, November 2025). ASIC acknowledged that some managers had strengthened compliance and governance since those reports, but considers many of the issues identified in REP 820 remain prevalent. The regulator warned that funds should not wait for regulator engagement before improving practices. The report identified that complex, multi-layered structures obscured exposures, fees and competing interests; that economic benefits generated from investor capital and retained by operators or related parties were not always clearly disclosed; that some retail distribution practices did not adequately communicate risk; and that higher portfolio concentrations were associated with a greater likelihood that advisers failed to demonstrate compliance with the best interests duty.
On marketing, ASIC flagged inadequate disclosure of underlying asset features, performance-focused material lacking balance, inconsistent promotional content, overstated liquidity (including '24/7 access to your money'), and terminology that understated risk or evoked cash products such as 'at call' and 'savings account'. On TMDs, ASIC noted that three quarters of reviewed retail funds recommended conservative allocations of up to 25% of investable assets, but warned that excessive allocations may lead to overexposure and that broad allocation classifications and overly low risk ratings undermine TMD appropriateness.
On fees, ASIC stated that borrower fees retained by managers, although legally payable by borrowers to lenders, represent an economic benefit derived from investor-funded lending and may reduce investor returns. It considers clear disclosure of their nature and quantum to be better practice. ASIC also set out expectations on conflicts of interest between Related Funds, including disclosure of inter-fund transactions, pricing of asset transfers, and conflicts arising when multiple Related Funds hold the same underlying loan.
Looking ahead, ASIC expects to consult in early 2027 on revisions to regulatory guidance, including proposing to extend Regulatory Guide 45 beyond mortgage schemes to all private credit funds and to define 'private credit fund'. ASIC also continues to advocate for expanded data collection powers, noting that Treasury released a consultation paper on the subject in September 2026. The regulator reiterated that poor private credit practices remain an enforcement priority.
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