ASIC Consults On Net Tangible Assets Requirement Changes For Managed Funds15 min read

Introduction

In March 2026, the Australian Securities and Investments Commission (ASIC) initiated a significant review of the financial requirements for operators of managed funds, one of several recent regulatory changes for non-bank lenders. The regulator released Consultation Paper 388 to consult on potential increases to the Net Tangible Assets (NTA) requirement, a core component of the regulatory resources designed to ensure the financial stability of responsible entities.

This past consultation from ASIC was a critical development for every fund manager, prompted by scheme collapses that exposed deficiencies in the financial resilience of some operators. This guide examines the key proposals from that paper and explains the practical implications of the proposed changes to the NTA requirement, helping responsible entities understand the evolution of their financial obligations.

Interactive Tool: Check If Your Fund Meets ASIC’s New NTA Capital Requirements

The Background of ASIC Consultation Paper 388

Why ASIC Initiated the Net Tangible Assets Requirement Review

ASIC initiated a review of the NTA requirement in early 2026, which was detailed in Consultation Paper 388.

ASIC considered it was an appropriate time to reassess these requirements to ensure they continued to meet their original policy intentions and to confirm that responsible entities were operating as entities of substance.

This review was primarily prompted by several key factors:

• The recent collapses of the First Guardian and Shield Master Funds, which exposed significant deficiencies in the financial resilience of some responsible entities.
• The failures of these managed funds placing more than $1 billion of investor funds at risk, highlighting the potential for substantial financial harm.
• The reality that the financial thresholds forming the basis of the NTA requirement had not been updated since 1 July 2013.

Understanding the Core Objectives of the Net Tangible Assets Requirement

The NTA requirement for a fund manager is not arbitrary; rather, it is based on several established objectives designed to protect investors and maintain stability within managed investment schemes.

Specifically, ASIC outlined four core purposes for the NTA requirement. These objectives are to:

• Ensure adequate financial resources: The responsible entity must have enough capital to meet all its operating costs, which includes the expenses associated with its regulatory compliance obligations under the Corporations Act 2001 (Cth).
• Align interests with members: By requiring the responsible entity to maintain sufficient equity in its own business, the NTA requirement helps to align its financial interests with the success and stability of the scheme members’ investments.
• Provide a buffer for failure: The requirement ensures a financial buffer is available to facilitate an orderly transition to a new responsible entity or to wind up the scheme if the entity fails.
• Maintain liquidity: A liquidity component is included to ensure the responsible entity can access its NTA to cover immediate and unexpected expenses without jeopardising the fund’s operations.

Examining the Three Key Options Proposed by ASIC

Option 1: A CPI-Linked Increase Across All Thresholds

The first option proposed by ASIC in its 2026 consultation paper involved adjusting all financial thresholds in the NTA requirement to account for cumulative Consumer Price Index (CPI) growth since 2013. The rationale for this proposal was that the thresholds had not been updated for over a decade and needed to be restored to their real value.

Consequently, this inflation-linked adjustment would have resulted in several key increases:

• The minimum NTA of $150,000 would rise to approximately $200,000.
• The $5 million cap on the average value of fund assets limb would increase to around $6.9 million.
• The non-concessional minimum NTA of $10 million would be lifted to approximately $13.8 million.

Furthermore, ASIC also sought feedback on whether an ongoing indexation mechanism, such as a periodic CPI adjustment, should be introduced to prevent the thresholds from becoming outdated in the future.

Option 2: An Increase to the $150,000 Concessional Minimum

This option specifically targeted the floor of the concessional NTA requirement, proposing to increase the $150,000 minimum. To address this, ASIC presented two distinct approaches for consideration by the fund manager industry:

• The first approach was to raise the $150,000 minimum to a higher fixed amount, suggesting a figure up to $1 million.
• The second approach involved applying the minimum on a per-scheme basis, meaning a responsible entity would need to hold $150,000 for each scheme it operates.

Ultimately, this per-scheme method recognised that operating multiple schemes generates additional costs and risks. As a result, a single flat minimum might be insufficient for an orderly wind-up if the entity fails.

Option 3: An Increase to the $5 Million Cap on the Fund Assets Limb

The third proposal focused on the $5 million cap applied to the NTA calculation based on the average value of a scheme’s assets. Notably, this cap had been in place since 2002.

In reviewing this limit, ASIC highlighted several key points regarding fund management risks:

• They noted that operational risk does not stop growing once funds under management reach a certain size.
• While the average revenue component of the NTA calculation is uncapped, the fund assets limb has remained capped.

Therefore, ASIC considered it might be appropriate to increase this cap to ensure that responsible entities with significant funds under management hold adequate NTA to reflect their increased operational risk.

What These Net Tangible Assets Changes Mean for Your Mortgage Fund Operations

Calculating the Potential Financial Impact with Scenario Math

The options proposed by ASIC in its 2026 consultation paper could have required a significant uplift in the NTA held by a fund manager. Understanding the potential increase is crucial for assessing how it might affect cash reserves or trigger capital calls.

To illustrate the scale of change, consider a responsible entity for a mortgage fund that was operating under the concessional NTA requirement with the minimum $150,000 in capital. The possible outcomes were:

• Under Option 1: A CPI-linked increase would have lifted the minimum NTA from $150,000 to about $200,000, calling for an additional $50,000 in regulatory capital.
• Under Option 2: If the minimum were set on a per-scheme basis, a manager running three schemes would have faced a requirement jump to $450,000 ($150,000 × 3).
• Under Option 3: For a larger fund, raising the $5 million cap on the fund-assets limb would have required a substantial capital injection.

Each scenario would have directly affected a manager’s financial position, forcing them either to allocate existing reserves or to raise fresh capital.

Assessing the Impact on Your Loan Book Growth & Warehouse Lines

An increase in the NTA requirement has direct operational consequences for mortgage funds, especially regarding loan book growth and lender relationships.

The capital that satisfies the requirement is restricted and cannot be redeployed for purposes such as originating new loans.

Because warehouse-facility lenders often set covenants linked to a manager’s financial substance, a higher NTA could undermine covenant compliance. Managers may therefore face:

• Funds available to originate new loans being reduced as capital is locked away.
• Pressure to meet strict NTA-linked covenants written into warehouse agreements.
• Tighter access to warehouse lines, hindering loan book expansion and overall scaling.

A heightened requirement can thus strain a fund’s growth trajectory and its rapport with key lenders.

Considering the Future of the Concessional Net Tangible Assets Requirement

In Consultation Paper 388, ASIC questioned whether the concessional NTA requirement … remained fit for purpose for responsible entities using an external custodian.

The original logic was that a qualified custodian holding assets reduced the need for the responsible entity’s own capital strength.

However, ASIC’s 2026 paper observed that the NTA requirement’s purpose extends beyond simply covering the cost of transitioning assets.

It also ensures the entity maintains adequate resources to meet operating costs.

While ASIC stopped short of a formal proposal to scrap the concession, the regulator was clearly testing the waters.

Eliminating the concession could force a manager to leap from a $150,000 requirement to the full non-concessional minimum of $10 million or more.

A Compliance Timeline & Checklist for Responsible Entities

Key Dates from the 2026 ASIC Consultation

To stay informed during the 2026 review of the NTA requirement, responsible entities needed to be aware of several past deadlines. Consequently, ASIC set a narrow window for engagement and preparation.

The key dates from the ASIC consultation process were:

• 18 March 2026: ASIC released Consultation Paper 388, officially beginning the review process for the NTA requirement.
• 17 April 2026: This was the closing date for all submissions and feedback on the consultation paper from any fund manager or interested stakeholder.
• 31 July 2026: ASIC had expected to release its final position on the proposed changes to the NTA requirement for managed funds by this date.

Your Internal Action & Communication Plan

In response to the consultation, every fund manager should have developed a proactive internal plan. Furthermore, this involved assessing the potential impact of the proposed changes and preparing the business for compliance with a potentially higher NTA requirement.

A practical checklist of actions that responsible entities should have considered included:

• Modelling the capital impact: It was crucial to assess the firm’s current NTA position and calculate the potential financial uplift required under each of the three options proposed by ASIC.
• Assessing downstream effects: Managers should have quantified the potential consequences for the business, such as whether increased capital requirements would necessitate a rise in fees charged to scheme members.
• Considering the concession’s future: Entities relying on the concessional NTA requirement should have seriously evaluated the risk of this concession being narrowed or abolished, which could have dramatically increased their capital obligations.
• Engaging with the consultation: Preparing and lodging a submission with ASIC before the 17 April 2026 deadline was an important step to ensure the industry’s perspective was heard.
• Preparing for transition: Given the proposed six-month transition period, affected entities should have started planning how they would raise any additional capital needed to meet the new regulatory resources threshold.

Conclusion

ASIC’s 2026 consultation on the NTA requirement proposed several significant changes for managed funds, including options for inflation-linked increases, raising minimum capital thresholds, and lifting the cap on the fund assets limb. These potential adjustments highlighted the need for every fund manager to assess their financial resilience and operational readiness for a stricter regulatory landscape.

Understanding the implications of these past regulatory shifts is crucial, so if you need guidance on your current obligations or future compliance strategies, contact our private lender and non-bank finance lawyers at GRM Law. Our specialists can provide tailored advice to help secure your fund’s operations today.

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