Review finds potentially damaging widespread practices in rapidly growing sector
A new report from the Australian Securities and Investments Commission (ASIC) has drawn attention to potentially damaging practices in the Australian private lending industry.
Between October 2024 and August 2025, ASIC reviewed 28 private credit funds – listed, unlisted, retail, and wholesale – ranging from major managers like Metrics Credit Partners and La Trobe Financial to new global entrants like KKR and smaller local managers such as RELI Capital Limited.
The review determined that outlined a litany of significant potential inconsistencies and deficiencies in the sector, including:
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Unclear reporting and terms: Funds reported low default levels (0-6%) but used inconsistent definitions of ‘default’ and ‘loan security’, potentially masking true portfolio risks
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Opaque fees and interest margins: Only a minority of funds disclosed interest rates or ranges charged to borrowers; fee structures often obscure the true cost to investors
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Weak governance and conflicts: Less than half of funds had detailed credit or impairment policies; many lacked policies for fair allocation of investment opportunities
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Poor valuation and liquidity practices: Most funds lacked effective separation between loan approval and valuation oversight; few wholesale funds performed liquidity stress testing
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Inadequate credit risk management: Many funds did not have formal default management policies or consistent approaches to impairments and stress testing.
Rapid growth of private credit
The Australian private credit market has grown rapidly, now estimated at $200 billion worth of assets under management, driven by superannuation savings, reduced bank lending to higher-risk real estate, and increased retail investor participation.
It comprises an estimated $50 billion of the real estate market, with CBRE anticipating it will grow to $90 billion by 2029. While only a slither of the residential mortgage market, private credit accounts for an estimated 4.2% of commercial lending and 26% of residential development lending.
“Private credit is good for Australia’s economy, borrowers and investors, but only if done well,” said ASIC.
“The better practices we identified build trust, integrity and sustainable growth in the Australian private credit market, while the poorer practices we saw may harm investors, erode trust and confidence, and hinder the market’s development.”
ASIC will use its regulatory and enforcement tools “when we identify misconduct”.
ASIC takes action
The regulator has certainly been more hawkish in recent times.
La Trobe Financial, one of Australia’s largest alternative asset managers, was slapped with two interim stop orders in September due to alleged deficiencies in the target determination for both products. These stop orders were lifted following negotiations with the regulator.
Another alternative lender, TruePillars, faced a similar fate in October.
While these actions from ASIC do not imply official misconduct, they served as a warning that the regulator is increasing its scrutiny over the industry.
ASIC said it will continue enhanced monitoring of the private credit market via data collection, analysis, and surveillance.
Further compliance and enforcement action will be taken as appropriate to deter misconduct and promote market integrity.
In 2026, ASIC intends to focus on fees, margin structures and conflict-of-interest management in wholesale private credit funds, especially those focused on real estate lending.
Impact on mortgage broking industry
Private lending remains a small but important part of the mortgage finance landscape, offering non-standard loans for borrowers who don’t meet the serviceability standards of the major banks.
While they come with higher interest rates, many property developers tap the private credit industry when no other means are available.
As these alternative lenders come under tighter regulatory scrutiny, brokers could see shifts in product availability, credit policies, and service turnaround times – especially from funds forced to improve governance, transparency, and risk management practices.
Lenders may become more selective, pricing could tighten and investor confidence might waver in the short term – potentially reducing the flow of capital to private lenders.
Longer term, however, a more regulated private credit environment may lead to a stronger, more sustainable funding channel, although time will tell in that regard.
