The Australian financial regulator has red-flagged private markets for closer scrutiny after admitting it has limited look-through to the fast-growing asset class.
In a new discussion paper published last week, the Australian Securities and Investments (ASIC) chair, Joe Longo, called out the private markets sector as a critical regulatory blind-spot.
“We note our international peer regulators have access to more reliable and recurrent data on private markets to enhance their transparency. This makes it easier to identify risks as well as opportunities,” said in a release. “At present, ASIC’s data and information gathering powers are inefficient and incomplete. We simply can’t do our job properly if we are in the dark.”
While the ASIC paper explores broader Australian capital markets issues – notably, the fading allure of the ASX – Longo buttonholes private markets for urgent attention given the country’s A$4 trillion superannuation sector high, and growing, exposure to the asset class.
“Opacity, conflicts, valuation uncertainty, illiquidity and leverage in private markets are the key risks I am concerned for ASIC to focus on,” he said. “The critical point is understanding whether there is a need for intervention, whether it is for ASIC or another regulator to consider, or whether we leave the market and wholesale investors to their own devices.”
According to the report, the Australian private markets pool has risen more than 160 per cent over the 10 years to the end of 2024 to reach almost A$150 billion.
During the same 10-year period, the total value of ASX-listed companies has almost doubled to A$3 trillion: however, the number of issuers declined by 4 per cent over the time-frame while the exchange raised just A$4.2 billion in new listings last year compared to almost A$23 billion in 2014.
Real assets (including property and infrastructure) comprise A$80 billion of the Australian private markets exposure followed by private equity (A$66 billion) and private credit (A$2.8 billion).
Despite the current relatively low exposure to private credit, Longo said ASIC was “concerned” about the asset class, which has been fastest-growing private markets category in recent times.
“There will be more failures in private credit investments, and Australian investors will lose money,” he said in the report. “ASIC is increasing its focus on private credit, not to constrain participation but with a view to being well informed and to test whether investment offers comply with existing laws.”
Submissions on the ASIC paper are due by April 28.
The NZ government is currently consulting on proposals aimed at increasing KiwiSaver holdings of private assets: the discussion attracted more than 40 submitters after closing for feedback on February 14.