INTO THE LIGHT

The surging private credit sector is attracting a great deal of scrutiny, and it's not without reason. While not all offerings are created equal, the investment case remains strong - as well may the case for regulatory intervention

- Matthew Wai

The last two years has seen private credit dominate; it's all anyone wants to talk about, and its growth and performance gives them good reason to.

But there have been other reasons emerge, too -like the sector's opacity, lack of regulation, and poor quality of asset valuations, to name a few.

Even attempts to set the scene in terms of the sector's size can prove contentious, with numbers differing across sources.

For instance, as at October 2024, the Reserve Bank of Australia estimates the sector to be about $40 billion, which excludes non-syndicated direct lending by super funds. EY, however, believes it is worth more than four times this, pegging it at around $188 billion.

And then there's the Australian Investment Council and Preqin, whose Yearbook 2025 says there was just $2.7 billion in closed-end market in September 2024, while the openended was about 10 times that. Or Alvarez and Marsal, which estimated $205 billion at the end of 2024.

Regardless, this upward trajectory has landed the sector firmly in the crosshairs of the Australian Securities and Investments Commission (ASIC).

"As Australia's financial markets regulator, ASIC is foremost committed to ensuring the strength and integrity of both private and public capital markets. Public and private markets support one another, and we are approaching our consultation from both an opportunity and risk perspective," ASIC told Financial Standard.

"As outlined when we launched the discussion paper in February, a critical point for ASIC is whether there is any need for interventions to address risk or adjustment to how regulation operates to take advantage of opportunities.

"While we don't see regulatory settings as the dominant factor here, there may be opportunities to adjust in order to improve the attractiveness of our markets."