ASIC REP 820: A Guide for Australian Private Credit Funds on Surveillance Obligations18 min read

Introduction

The private credit market in Australia has expanded rapidly, prompting increased scrutiny from the Australian Securities and Investments Commission (ASIC). In its recent Report 820 (REP 820), ASIC details the results of its extensive private credit surveillance covering both retail and wholesale private credit funds. The report assesses how these funds manage key risks, highlighting both better and poorer practices across the sector to improve investor protection and market operation.

Following this surveillance, REP 820 sets a new benchmark for operational standards and signals heightened regulatory focus on the private credit market, part of a broader trend of regulatory changes for non-bank lenders. This guide provides a clear overview of the report’s key findings, principles, and the future obligations for funds in Australia, which will be further detailed in a forthcoming regulatory catalogue. Adhering to these standards is essential for all operators to ensure compliance and prepare for ASIC’s planned regulatory actions.

Interactive Tool: See If Your Fund Meets ASIC REP 820 Standards

What Is ASIC REP 820 & Why It Matters for the Private Credit Market

The Purpose of ASIC’s Private Credit Surveillance

ASIC conducted its surveillance in response to the rapid expansion of Australia’s private credit market, which is estimated to be worth $200 billion.

This growth has been driven by several key factors:

• Superannuation funds seeking diversification.
• A decrease in bank lending to certain sectors like real estate.
• Greater participation from retail investors.

Given this expansion, ASIC sought to ensure the market functions well for the economy, borrowers, and investors. Between October 2024 and August 2025, the ASIC surveillance reviewed 28 private credit funds, covering a range of listed, unlisted, retail, and wholesale funds.

The primary purpose was to assess how these funds manage key risks that are critical for maintaining investor confidence and stable market operation.

The review focused on several key areas, including:

• Fund disclosures and transparency
• Marketing and distribution practices
• Fee and income transparency
• Governance and conflict management
• Valuation processes
• Liquidity management
• Credit risk management

Key Findings from the REP 820 Surveillance

The REP 820 report found that while some operators in the private credit market demonstrate strong practices, there are significant failings across the sector that require material improvement. The surveillance revealed that practices are often inconsistent and not always executed well, which could harm investors and erode trust in the market.

ASIC identified several examples of poorer practices that present risks to investors and market integrity. These key findings include:

• Inconsistent reporting: Many funds use unclear terminology and reporting methods, which can mask portfolio risks and make it difficult for investors to make informed decisions.
• Opaque fee structures: Fee and interest margin arrangements were often not transparent, obscuring the true cost of the investment for investors.
• Weak governance: The review uncovered weak governance frameworks and poorly managed conflicts of interest, which risk harming investor interests.
• Poor valuation practices: Many funds lacked effective separation between investment teams and those responsible for valuations, impacting the fairness of entry and exit prices.
• Inadequate risk management: A significant number of funds, particularly wholesale funds, did not perform stress testing or have detailed written policies for managing credit risk and defaults.

The 10 Principles for Private Credit Done Well in Australia

Foundational Principles Stewardship Organisational Capability & Governance

Responsible entities (REs) and trustees are expected to act as stewards of investor capital, ensuring their decisions are fair and prioritise the best interests of investors. Consequently, this approach safeguards fund assets and maintains trust in the system.

Additionally, to ensure proper conduct, boards should actively oversee all fund operations, which includes monitoring:

• How impaired assets are treated.
• The overall integrity of fund operations.

To operate effectively, private credit funds in Australia must maintain adequate human, financial, and technological resources. Maintaining this capability is crucial as it supports operational resilience and regulatory compliance.

Moreover, as a fund grows in size and complexity, it should regularly review and update its core components to ensure it has the necessary expertise, specifically focusing on:

• Adequate staffing levels.
• Robust technological systems.
• Sufficient capital reserves for areas like credit, risk, and compliance.

Sound governance structures are essential for promoting accountability and responsible decision-making. To achieve this, funds must establish well-defined roles, documented processes, and clear lines of accountability.

Furthermore, a culture of risk-awareness and transparency should be embedded throughout the organisation. This must be supported by independent oversight from REs and trustee boards that remain separate from the business.

Investor-Facing Principles Transparency Design & Distribution & Fees

Investors must have access to timely and transparent information regarding a fund’s investment strategy, exposures, valuations, risks, and fees. Providing this clear disclosure supports comparability between different private credit funds and allows investors to make informed decisions.

To further enhance this transparency, ASIC encourages the adoption of consistent reporting practices and standardised terminology across the market.

The design and distribution of private credit products must be fair, transparent, and appropriately targeted. This ensures that investors receive clear and accurate information, which helps mitigate the risk of mis-selling unsuitable products.

Key considerations include:

• Determining an appropriate target market that reflects any high-risk or complex fund features.
• Strengthening distribution oversight to ensure product suitability, including for products offered via platforms.
• Ensuring platforms provide clear and accessible information to investors.

All fees and costs associated with a private credit fund should be fair and transparent, giving both investors and borrowers a clear understanding of the total costs involved. Ultimately, this practice enables informed decision-making and promotes trust.

To provide a clear picture of the manager’s total remuneration, funds should disclose all income streams, including:

• Standard management fees.
• Any borrower-paid fees.
• Charges related to default interest.

Risk Management Principles Conflicts Valuations Liquidity & Credit Risk

Conflicts of interest must be identified, disclosed, and effectively managed or avoided to promote fair treatment for investors and borrowers. Consequently, arrangements that unduly favour one party, such as certain fee or co-investment structures, should be avoided.

Additionally, it is important to ensure a clear and fair allocation of assets across funds, alongside the disclosure of any related-party transactions.

Valuations must be fair, timely, and transparent, supported by strong governance. Since valuations determine transaction prices and can influence fees, it is critical to implement clear and consistent methodologies.

ASIC considers it good practice to:

• Undertake valuations regularly, such as monthly or quarterly.
• Ensure appropriate independence in the valuation process.
• Include periodic external audits to verify valuations.

Liquidity risk needs to be effectively disclosed and managed to avoid structural mismatches between a fund’s assets and its redemption terms. By doing so, this minimises disruption during periods of market stress and ensures fair treatment of all investors.

To maintain stability, funds should clearly disclose their redemption terms and stress-testing practices. Furthermore, they must ensure distributions are funded sustainably by:

• Relying on asset-generated cashflows.
• Avoiding the use of new investor capital.

Finally, credit risk must be managed effectively across the entire loan lifecycle, from origination and portfolio construction through to monitoring and repayment. This practice ensures disciplined lending, aims to preserve investor capital, and supports long-term performance.

To achieve this, a well-documented risk management framework should be applied, incorporating:

• Standardised credit assessments.
• Regular reviews of borrower performance.
• A consistent approach to impairments.

Key Areas Australian Private Lenders Must Fix

Improving Fund Disclosures & Marketing Practices

ASIC’s surveillance identified that many private credit funds need to lift the clarity of their disclosures. Unclear investment strategies were common, and several funds failed to spell out the underlying assets—especially when using feeder funds or special purpose vehicles (SPVs).

This lack of detail leaves investors unsure of what they are ultimately exposed to and undermines informed decision-making.

In addition, the inconsistent use of key terms across the market creates confusion and makes comparability difficult. Common expressions are defined differently by various operators, and the mismatch can disguise portfolio risks. Key terms that are frequently applied in divergent ways include:

• default
• investment grade
• secured loans

Marketing practices drew similar criticism. Some funds relied on aggressive or unbalanced promotions that highlighted benefits while downplaying potential capital loss. Where the advantages of a fund were exaggerated without equal prominence for risks, investors faced a real danger of being mis-sold products that did not suit their needs.

Addressing Opaque Fee Structures & Income Transparency

Transparency around fee and income structures remains poor, with many funds using opaque arrangements that let managers keep substantial income undisclosed to investors. When managers retain borrower-paid fees and net interest margins without revealing the full amounts, the true cost of the investment becomes hard to gauge and fund-to-fund comparisons suffer.

Managers commonly keep several types of income, including:

• Borrower fees: origination, loan establishment, early repayment and default charges that are often not passed on to investors.
• Net interest margins: the spread between the rate charged to borrowers and the rate paid to investors, which some managers retain partly—or entirely.

In extreme cases, fund managers retained up to 100 % of origination fees or all default-interest income without quantifying it. Investors are therefore left unaware that a manager’s total remuneration can be multiple times higher than the publicly disclosed management fee.

Strengthening Governance & Conflict Management

Weak governance and poor conflict-of-interest management were recurring failings, particularly in wholesale funds with minimal oversight from REs or trustees. Problems are amplified when the trustee sits within the same corporate group as the investment manager.

Conflicts observed by ASIC included:

• Non-disclosure of related-party transactions that should have been transparent.
• Conflicted allocation decisions where investment-committee members held financial interests in the outcome.
• Fee structures that incentivise behaviours misaligned with investors’ best interests.

Many funds also lacked formal, documented policies for essential operations. Roughly half of the wholesale funds reviewed, for example, had no adequate policy to ensure the fair allocation of investment opportunities among the different vehicles they managed.

Uplifting Valuation, Liquidity & Credit Risk Management

ASIC found that valuation, liquidity and credit risk frameworks often fall short of protecting investor capital. Several funds allowed the same committee that approves loans to perform valuations, creating an obvious conflict of interest. Policies were incomplete, valuations were infrequent, and “as-if-complete” assumptions for construction loans understated risk.

Liquidity management showed similar weaknesses. Private credit assets are inherently illiquid, yet many funds offer frequent redemption windows without liquidity stress testing, exposing investors to withdrawal delays in a downturn.

Credit risk processes lagged as well. Fewer than half the funds maintained written policies for managing impairments or defaults, and inconsistent definitions of “default” hindered performance comparison across portfolios.

ASIC’s 2026 Roadmap & Future Obligations for the Private Credit Market

Increased Surveillance & Enforcement Actions

ASIC has signalled its intention to continue its surveillance of the private credit market in 2026, indicating a more intensive supervisory approach. Consequently, this ongoing monitoring aims to deter misconduct and promote market integrity as the sector continues to expand.

The focus of this future surveillance will specifically target key areas of concern identified in REP 820, which include:

• Scrutinising how fees and interest margins are structured and disclosed, particularly in wholesale private credit funds.
• Examining how wholesale funds manage conflicts of interest, especially those involved in real estate lending.
• Reviewing the distribution of private credit funds to retail clients through both direct and advised channels.

Alongside increased surveillance, ASIC will continue to use its regulatory and enforcement tools to address misconduct. Furthermore, the regulator has already issued stop orders on some funds due to poor disclosure and distribution practices, and has commenced enforcement investigations into more egregious conduct.

Potential Legislative Reforms & Enhanced Data Collection for Wholesale Funds

ASIC is using its surveillance findings to advocate for key legislative reforms for managed investment schemes. Ultimately, these reforms are intended to strengthen investor protection, address data gaps, and promote greater transparency within the private credit market.

The regulator has proposed several significant changes that would primarily affect wholesale funds, encompassing potential reforms such as:

• Requiring operators to notify ASIC upon the establishment of a new wholesale fund.
• Extending the requirement for annual audited financial reports, which currently applies to retail funds, to wholesale funds.
• Considering whether to apply the statutory duties that responsible entities of registered schemes owe to wholesale fund operators.

To address current data limitations, ASIC plans to enhance its data collection capabilities. As part of this initiative, the regulator will pilot an enhanced data reporting program in 2026-27 with a small sample of funds to test the feasibility of gathering more comprehensive data on the sector.

Conclusion

ASIC’s REP 820 establishes a new benchmark for Australia’s private credit market, detailing significant operational failings while outlining ten core principles for better practice. The report signals increased surveillance and future obligations, making it essential for both retail and wholesale private credit funds to address these identified weaknesses to ensure compliance.

To meet these heightened regulatory expectations, contact GRM Law’s private lender and non-bank finance lawyers for specialised legal guidance. Our experts can help ensure your operations align with ASIC’s standards and proactively manage your compliance obligations in this evolving market.

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