Investors urged to vet private credit managers after ASIC's 'more failures' warning
The corporate regulator warned there "will be more failures in private credit investments, and Australian investors will lose money".
Investors in private credit funds are being warned to closely scrutinise the valuation methodologies being used by managers operating in the booming sector, amid growing expectations of an uptick in troubled loans as the broader economy falters.
Private credit funds managed $148.6 billion at the end of 2024, according to ASIC, up 161% over the preceding decade. The corporate regulator earlier this year pledged to increase its scrutiny of the sector, amid concerns of a lack of transparency over valuations, and a looming rise in defaults. "There will be more failures in private credit investments, and Australian investors will lose money," it warned.
Reach Alternative Investments head of investments, Jonathan Ng said he had witnessed some instances where funds were not writing down the value of assets in their funds when troubled debt positions were converted into equity in borrowing entities.
“From anecdotal evidence, it sounds like there may be some of that going on where people are just expecting everything to be safe and secured and then they're finding there's a lot of equity in their portfolio because people have defaulted,” Ng said.
