Transcript from the ASIC Annual Forum 2025 Plenary session 7: The future of capital markets panel, held in Melbourne on 12 - 13 November 2025.
Speakers:
- Simone Constant, Commissioner, ASIC
- Andrew Fraser, Chair, ART
- Simon Rothery, CEO, Goldman Sachs Australia and New Zealand
- Jason Collins, Head of Australia, BlackRock
Facilitator: So I’ll start with you, Simone. ASIC’s recent report, Public Private Markets: a Roadmap for Strengthening Market Practices and Regulatory Approaches. Obviously, a new sort of focus really on private credit. Just worth asking you sort of what’s the reaction been to it? What are the, how do you think it’s going to influence the evolution of the markets over the coming years?
Simone Constant: I think it’s probably only fair to let my three fellow panellists talk about the reaction. And it’s probably fair for me to make a few remarks while they gather their thoughts as they comment, as the regulator population on their reaction to the regulator. However, in terms of the impact or effects, the sort of shaping, I think, was the nature of the question, I think to answer that, we have to just anchor back in what we did and why we did it. And that’s because just to scotch any confusion, this is not ASIC picking market winners. This is not ASIC trying to be a market maker. It’s not preferring one market over another or overstepping what a regulator should and shouldn’t do. This is just ASIC trying to meet our mandate, right?
So by law, we’re required to promote, maintain, facilitate an efficient, effective financial system, and promote confident and informed participation in it. That’s the law. In practice, like many people in this room know better than me, but in my experience, we know that strong, and we heard it all morning, that message, like strong, predictable regulation that’s enforced and enforced fairly and with consistency, is an important regulatory moat for the country.
A couple of weeks ago, I was actually with John Lonsdale and Gina in a different conversation with Australian investors who were saying that regulatory moat, not to be anti-competitive, if Gina’s still in the room, but that regulatory moat is a really important feature for Australia for Australia’s competitiveness. And that requires us to be informed and confident in ourselves, right? And to ask the sort of questions we have. And we see that, we see that benefit manifest.
The question was asked by James Thompson about what would you like to see in regulation? And something I’d like to see is us better capture the benefits of regulation as well. But you see it, right? When I was close to the balance sheets of a couple of Australia’s largest banks, we saw that not just in good times could we get issuance away with pricing and execution certainty, but actually, our relative performance compared to global peers got better in times of volatility. And we also saw, we saw after the Trump tariff effect, that Australian corporates like Transurban, they were back out issuing globally within days, right?
So in volatile times in particular, these sorts of moats in Australia and their dependability are really important for our competitiveness. And at the moment, they’re good times at the moment. We heard this morning, the bulls are running and capital’s flowing back and in between. But it’s important to protect that.
So with that what were we trying to achieve? What do we hope will be the impact? Well, we’re trying to operate the way we ask the regulated population to, right? We’re trying to be transparent. So we asked some really meaty questions and we asked them openly. And I was glad to hear that comment this morning about us putting ourselves out there, because we really did. We’ve spent 12 to 18 months publicly asking, are we part of the reason, for example, that public markets are flat? And is that something that’s not competitive for Australia? So that’s transparency.
We tried to be, we’ve tried to be accountable. I think we have been accountable. We asked some open questions, which is really uncomfortable for a regulator, but now we’ve been accountable for the answers. And we’ve put together a package of work that’s about that high with those answers. And we’re trying to be consistent. And that consistency was the theme this morning, that good regulation. You heard it from Sarah, that consistency, we will enforce where you need to, you heard it from Joe, you heard it from John, that consistency. We will do, to use Sarah’s words, what we say we will do. And so we’ve given a plan of what that is.
And just to round that out, well, what is that? It’s a plan that says, actually, we heard that not that much of what’s going on in public markets being flatter is specifically ASIC or specifically Australia, but you know what, we’re going to be accountable for these things we’re going to do. And there’s a plan around that, some things that we’re going to change that are within our gift. And we’ve said we’ll be accountable for our views on some other things that aren’t in our gift. And invite us into the conversation when folks are ready, and this is probably what we’ll say.
We’ve said, we know that financial markets infrastructure is really important, dependability of the ASX and other things. And here’s what we’re going to do. Here’s the panel, we’ve opened ourselves out again transparently to a panel of three eminent Australians, as they were described this week, who will say what they say about what we need to do. And we have that energy. I won’t say nervous energy, which was the word of yesterday, because we’re not nervous, but we have the energy to respond to that with gusto.
We heard that, and we’re being accountable for the fact that our data and information fall short of others around the world. And we might talk more about that later. Well, we’ve said, this is what we’re going to do. This is the pilot we’re going to pursue. These are the steps we’re going to take like openly.
And then I think on the private market set, I think we’ve been accountable for what we are and aren’t concerned about in private markets. It’s like with super. We’ve called it out, identified it like everyone as being this massive force here. We’ve said what we are and aren’t worried about. We have said that beyond our work on member services or market integrity, we will be balancing our work to ensure we’re paying close attention to them meeting their responsibilities to markets and members, whether it’s disclosure, whether it’s conduct, whether it’s take private transactions, whether it’s financial reporting.
In the private markets, more broadly, we’ve said, this is what we are and aren’t worried about. And then within that, you touched on private credit and that’s probably a bigger conversation. But on the private credit side, we continue to say that private markets, private credit, when done well, are really good for the economy and for investors and borrowers. But I do want to be really honest. There are some things that are really not being done well, and we’re really worried.
Like that’s why we have absolutely put our back into the private credit space. That’s why when I was asked recently, is this it? I think I was publicly quoted as saying, we are far from done. We’ve announced our next surveillance. You heard this morning when Sarah spoke about the enforcement priorities. A couple of weeks ago, we were asked, why are you ruling out enforcement? I think today we’re very clearly ruling it in.
And that’s because with those growth rates, with what we’ve seen, we’re concerned about building on what our expert report said when they looked at what are the sort of practices you’d like to see, building on the 10 principles we’ve laid out. We think that we need to keep pressing into this. This is something we’re worried about, and we will be dependable and consistent in that regard until we see private credit consistently done well.
Now, what I would say by the way is, it’s good that you’re going to ask what the reactions are, because that’s a lot of work. We have done a lot of work. We’ve done work with academics, with industry, with panels. A lot of our own work, revealed what we think, used our own surveillance, our own tools. We kind of think we’ve given a really clear plan and you can depend on us to follow it through. But what we would say is, kind of it’s over to business and industry to take it from here.
Simon Rothery: Yeah, thanks, Simone. Look, first of all, I’d actually like to commend ASIC on the report and not just because I’m sitting next to Simone. I think it’s a really forward looking report, and I think it’s unprecedented in many ways. The fact that you released a discussion paper, what, over a year ago, you’ve had feedback from 100 market participants, goes I think to what the report outlines and the principles that it puts forward.
So I think it’s a great thing for the industry, and we’ll talk about it later, but I think it’s now up to us to make sure that we’re adhering to those principles and benchmarking to the 10 principles. And I think it’s great that it’s principle-based and it’s not re-regulation. And so it gives us a very clear roadmap in terms of private markets, and we can talk about public markets. But I think also that you address public markets and private markets in the same report.
Because I think certainly in my 30 years of banking, probably other than the creation of the superannuation industry in this country, I think we are now faced with the biggest structural change in terms of the formation of capital, particularly private capital and what that means for public markets. And it’s profound. And we see it in our business every single day.
There’s probably no better example that in January of this year, Goldman Sachs globally announced the formation of a new division called the Capital Solutions Group, a dedicated division that looks at how we raise capital, public or private, for our clients all over the world. And that is driving our business. And it’s something that we need to think about every single day.
So I think it comes at a great time. It’s very clear. There’s some, I think, very clear, as I said, principles. And as you said, Simone, in the surveillance report, you saw some good practices and some bad practices. I think the great thing for us, and we strongly believe that private credit and private markets are great for the economy. Private credit sustains businesses that otherwise wouldn’t operate. In the US, it’s a big driver of the economy, it always has been, private equity in particular and now private credit. We see private credit as just, it’s in its infancy. We say in the US, we’re only in the first innings. There’s a long way to go.
So to be able to look at this report in Australia as the market is just developing, and to be able to have a framework to put in place, I think positions us really well from a competitiveness perspective. I think investor confidence, both domestically and overseas, investors will look at this and have confidence in private markets, and you’ll raise standards. There’s no question. Assuming people benchmark and you surveil, standards will be increased as a result. So we’re very, very positive about the report.
Facilitator: What are your views, Andrew?
Andrew Fraser: So substantially in alignment with all of that, and I would make the observation that I think it’s a timely report. There’s a lot of chat in the marketplace about private markets and private credit, and so leaning into that and actually doing the discovery and surfacing the information, and in fact finding out that one of the key issues here is that the information gap was one of the areas to address for the future, I think was really important, and meeting the mandate.
I did really love the box of the regulatory strike zone. I think the idea that there’s this target where regulators should try and land the regulation is a pretty cool idea. If you grow up thinking about regulation, that sort of stuff can get you a bit excited.
But I would also make the observation that I think one of the important things out of the whole report and out of the conversation is I think we get to reduced binary debates often, especially in Australia. So we’ve had this kind of, private markets are bad and it’s going to be the end of the world, and private credit is particularly evil. And all we need is really good public markets that actively traded and the world will be fine. Well, actually private markets need really good functioning public markets in order to contribute what they can contribute, and there is a role for private markets.
And by the way, people have been engaging in private credit for a while now, not just the last five minutes, not just the last 100 years. Old mate’s been learning to old mate a few shekels and a few bob for a few 1,000 years actually. And so there’s a place for that. What I think is really important here is that where we understand what’s the difference for where regulation needs to sit for institutional investors, like Australian Retirement Trust, and where it needs to sit for the retail investor, and making sure that we have that very large distinction in the regulatory setting. So that we’re not having lowest common denominator regulation that doesn’t proportionally fit with what we actually want to see, as we want to see capital formed and flow through the economy.
Facilitator: Jason.
Jason Collins: Well, it’s a tour de force. I mean, there’s just so much to consume. It covers public markets, private markets, product structures, superannuation, data, and for a lot of market participants, they could look at one component part and have a lot to lean into. And for us, we actually cover all component parts. And so we’re really keen to work with the industry and work with the regulator, and the road forward is going to be really important.
I think on public markets, Dr Comerton-Forde wrote some great, great research. I think the commentary around index and the validity of index is really important. The notion that the benchmarking regime, there’s a lot of debate and a lot of work going on on that at the moment. In private markets, it might surprise the people in the room but we have more private market investors in Australia now than we’ve got public market investors. So we invest nearly $40 billion in private markets, in Australia’s capital markets.
So we looked at the work there. I think it’s very restricted in one component part to the retail private credit space. We don’t have any evergreen structures here, no wholesale trusts that are marketed to individuals. But we may do in the future. So it’s very instructive for us.
On data, I mean, clearly you’ve identified an asymmetry of information between fund managers, investors and regulators. It’s more pervasive definitely in the wealth space. In the super space, I think you identified the people that had direct holdings in private markets. The transparency was very good, but if they’re allocating to third parties, there’s room to grow there, and I think we’ll debate that transparency point later.
Facilitator: Good stuff, thank you very much. So what steps are most critical for industry participants in promoting [unintelligible 00:14:23] on that confidence in international investors. What do you think are the most critical steps to get right to promote that consistency and trust?
Simon Rothery: Yeah, so I think the next steps, certainly for us are very clear, and I think the great thing out of the report, and I think the phrase line was, ASIC is very supportive of private credit done well. But of the 28 funds that you looked into for the better part of a year, there were some good practices, that there were not so good practices, particularly around fee disclosure, aggressive marketing of products to people who maybe didn’t understand what they were buying.
But for us now, the 10 principles are there, and I think every private credit fund in the country, wholesale and retail, and this needs to be done at the fund level, needs to conduct a benchmarking exercise against the 10 principles, and document and report against those 10 principles. We’ve certainly started that process in the private credit funds that we operate in Australia, and I think everybody should be doing that. And I think it’s incumbent upon boards and management to ensure that that happens moving forward because it’s very clear.
Facilitator: Yes. Do you have a view, Andrew?
Andrew Fraser: So I would agree with that, and I think one of the reasons that it’s timely to do it is the growth of private credit in recent times has come through a fairly benign credit cycle, and so I’d make the observation that it’s pretty easy to lend money. The trick is getting it back. And so I think the idea here that there is an enhanced level of disclosure about where funds are is going to add to the transparency of the market, which can only improve the position for investors and for the economy more generally.
I think that is at the retail space rather than the insto space. I don’t have a concern for that sitting here as Australian Retirement Trust Chair. Because our team is there to be able to get to that info, and if they can’t see it, then they shouldn’t invest. That’s a different equation to where retail investors are.
I only provide them with one Chair request overlay, which is count the grey hair. And the reason I say that is, if you think about the credit cycle in the last while, then the growth of private credit hasn’t matched a downturn in the credit cycle, and so it’s quite easy, as I said, to let the money out, but the trick is getting it back. So you want to understand the position of the fund, but you also want to understand the experience.
Facilitator: Segues nicely in transparency, I think, which is a key thing Jason alluded to before. High quality recurrent data can transform regulatory oversight, but there does seem to be gaps. So I’m presuming that’s going to be where you think you need to see more action.
Jason Collins: Yes, so we approach data in two ways in our business. The first is through data collection, and we have a business that was quoted in the report, several reports, which is called Preqin. And essentially Preqin collects private market data. And then we have another business which helps private market fund managers and asset owners, like Australian Retirement Trust, to understand what they own in private markets and to better plan and do risk scenarios around that.
On the private market side with data, it’s really complex. Because in public markets you’ve got this disclosure regime and standardisation of reports, and so you’ve got structured data. But in private markets, it’s really unstructured data. So if you’re a private capital manager, you’re going out to your portfolio companies, you’re getting information, you’re then publishing letters to your LPs, limited partners, and so you’re trying to put together the data across, say, 10 portfolio companies across 10 vintages, and the data you’re getting is inconsistent. And so it’s really hard to pull that unstructured data together. So we’ve got a data acquisition team that looks at pulling it together and making sense of it, and providing private market managers with greater insight and regulators also with greater insight.
I think if you’re an asset owner or a private capital manager, it’s really easy to understand what you own from the public lens, because you can look at the security level up and you can evaluate the risk that you’ve got. So the idea is to try and understand what you own from the company level up within private market funds. And then if you can understand the cash flow, the leverage, the valuation principles, and you’ve got a set regime, you’re much better placed at the enterprise level to understand exactly what you own across public markets, across private markets, and then you can do an assessment about the risk that you face in certain scenarios.
And the sophisticated investors in Australia, the large super funds in particular, the sovereign funds, they’ve got the budget to buy the data, they’ve got the budget to have the workflow systems, and they’ve got this kind of this confluence now of workflow, software, and data working really well. It gets really hard for smaller managers to do that. And so there’s sort of a gradual process. So I’m not surprised there’s been some missteps.
Facilitator: Simone.
Simone Constant: Yes, I think we have, we look at it from a different dimension and with a different perspective, the data question. Although I’d probably reinforce a couple of things that Jason’s already said. It’s good to hear industry talking about the benefits of data, including us having data, and the way that can help for growth, for investment, and widening access and participation. Because informed investors can participate, right? So sometimes we talk about the concept of convergence of public and private markets, not being too binary, to pick up on Andrew’s point. So I think that’s really important, but it’s better for the market to talk to that.
From the regulator perspective, I think it’s good that something that’s just come out then is what we are and aren’t worried about in terms of superannuation, for example. So actually, we should say that we get pretty good data and information about private markets investment when it’s held through APRA-regulated super, for example. And really great work is done within ASIC now to make sure that what is disclosed as well is accurate, and that’s the work on financial reporting and audit that was released a month or two ago, and that’s what’s really important. The whole system is really important for getting those disclosures right.
But we do have very mature tools there, just like we have very mature tools, of course, in the public market. ASIC continues to say we want both markets, but there are some advantages, of course, in terms of transparency of the public market.
When it comes to private market side, like, I’m just going to own it. We think there’s a gap. And actually, I’m so pleased, like if you asked me my top four parts of the report, top four or five, I’d say that that strike zone, that disclosure strike zone is one of the most powerful pieces of all of the swathe of work. And what’s really interesting is it shows where we sit. And we sit well south, right, of comparable economies and systems. We sit south of Switzerland.
Like, OK, so Switzerland’s really beautiful, got lots of great things going for it, and lots of great banks, but it’s admired less for its beautiful disclosure regime and approach to disclosure, I’d have thought, than its geographical features, or maybe some of the banks that originated there, or its Toblerone. So I think the fact we are south of Switzerland in that strike zone, let alone Singapore, let alone Canada, let alone the US and the UK, kind of hammers home when you put it up against the fact private credit’s grown 500% in a decade. Like, once upon a time, that was like a greenfield toll road growth rate or something. Like that’s massive.
Put that growth rate, put the risks if we get this wrong and our kind of poorer practices that we’ve seen in the surveillance report, some of our enforcement work is showing that, like the risk of harm, together with the fact that we’re not even in the strike zone, let alone approaching the middle or the sweet spot. We need data. We need to do something.
Now, to set everyone’s mind at ease, like I’ve said, we’re going to be transparent, accountable, consistent. We have said, here’s a plan. We’re going to approach this with some rigour. We’re listening to industry. We’ve got a pilot for how we’re going to approach it. But we do need to move on this, and that’s for the sake of system stability, and also knowing what investors are getting in and having that confidence.
Facilitator: Is that a concern, Simon, where we’re sitting below in terms of what Simone’s talking about there?
Simon Rothery: No, I think it’s very valid, and I think the glaring thing in the report was obviously the lack of data that we’re getting in Australia compared to foreign jurisdictions. And I know that you’re consulting with foreign jurisdictions in terms of how they get the data, and they do have access to a lot of data, but we need a consistent data collection process. I think to Andrew’s point, private credit’s been around since day one, but a big part of our business is private wealth management. Every time I go to see a family office, and there’s a lot of them in Melbourne, they’re all starting private credit operations. Now, how do you collect that data, for example? So I think it’s the key point.
Facilitator: Very good.
Andrew Fraser: I think the only thing to add into that potentially is I think one of the things that we lose in the debate or the discussion around private credit is it often sits on the other side of private equity. And so the challenge here for us as investors, I think, and for the investment community is, if you’re not seeing the exits in private equity, then you can have really sophisticated valuation models, but actually you can value something. You will know what it’s worth when it’s sold, and so you need the exit pathway to actually inform the market.
And I think one of the things that perhaps just hasn’t been as significant feature of the discussion about private credit growth is private equity growth went like that, private credit growth went like that, and we’re not seeing as many exits in the private equity space. And so to my mind, there is an issue there for all of us to think about collectively about what that means, and in fact, the confluence of the two can start to provide a different type of question for us to think about.
Facilitator: That’s an interesting point.
Jason Collins: I think, just adding onto that, I think in terms of the data and collecting the data, I think is important, but also, and the report touched on this, but it’s also just the consistency of the data. It’s OK getting data on valuations or liquidity or default rates, but actually, is there a consistent methodology across all of the funds? Otherwise, the data’s not that valuable. So I think we really need to ensure that there is a consistent approach, particularly when it comes to things like liquidity to valuation to definitions of default.
Simone Constant: Yes, the effective – I mean, just because it’s such an important point, effective disclosure is what we’re talking about, effective disclosure that gives effective transparency. You need some common terms, right? From the fact that it’s still, can’t believe the wide view on what investment grade looks like, through to, in our report, the wide view of what default is, right? Quite a wide view, and we laid that out in a table. You actually need alignment on those things before you can get to that effective disclosure that really supports the transparency we want.
And again, it’s for the benefit of both end investor what this disclosure means, through to understanding where Andrew was going, or what happens if there’s a stress event and you’ve got financial engineering and leverage interlinking things?
Facilitator: Yeah, very good. So trying to get ahead of that. And I was just going to ask as well, the financial time seeks investors everywhere, but Australia at the moment on private credit seems to be a hot topic, and Asia, Australia and India seem to be places that at least some international investors are looking at. So I guess, does this conversation then frame that for them and improve that confidence? And are you seeing that as well? Perhaps Simon? Are you seeing that sort of international interest in private credit in Australia? Possibly because of growth rates?
Simon Rothery: Yeah, absolutely. I think if you look at the numbers in terms of private credit, in terms of investors into the Australian market, I think it’s only roughly 5% super funds. So far, it’s sort of 55% domestic other funds. And then it’s the offshore players. And so, we’ve got BlackRock, we’ve got pretty much every alternative manager, as they call themselves, is setting up an office in Australia. It’s a very attractive market. They’re getting returns, which are probably 1 or 2% higher than they’re getting in the States and Europe at the moment. And that sort of goes back to my initial point. We’re just – I know there’s been a lot of private credit provided and the growth is enormous, 500%, but it’s just the beginning.
Facilitator: Are you seeing that as well, Jason?
Jason Collins: Yeah, I mean, you’ve got a bank-dominated lending market still in Australia. It’s probably 75, 80% of lending to corporates. In the US, it’s the inverse of that. And following Basel III, you’ve seen it really take off generally around the world.
I think there’s further room to grow. I mean, we’ve got a subsidiary business here that was acquired during the last year, which has quite a lot of capital lent out. It’s mainly in the sponsor space. Very different to the private credit that was caught under the surveillance, which is mainly the wholesale space and real estate in focus. But it’s certainly a growing market here.
And I think in general in private markets, and if I take it sort of up to the highest level, there’s not enough capital in the world. The demand for capital is so great, it breaks the traditional sources of capital. And traditional sources of capital are banks, governments, and corporates. And governments around the world have huge high debt-to-GDP levels, around 90%. In Australia, it’s a lot better. It’s like 35%. But we’re forecasting deficits for the next 10 years.
And banks are originating to hold, but banks will more than likely start to originate to distribute. And private credit firms are really important to take on that credit. So in a world where there’s huge infrastructure investment needed because of AI, transition to a low-carbon economy, regionalisation, demographic trends, in a world where there’s a lot of capital needed, private markets are going to grow.
And so this work’s really important, because even though Simone was quoting growth figures over the last decade, our expectation is it continues to grow at a rapid rate. Not at the expense of public markets, by the way. I think both grow quite substantially.
Facilitator: Very good. I think we have a question from the floor here. Sorry. Does Australia’s capital market have a regular, a negotiated market, but not OTC, that allows transactions to occur outside regular markets, which could potentially distort the market? How is that supervised?
Simone Constant: I think there’s a quick answer to that. It’s a very specific and yet great and open question, in the sense it’s exactly what we’re talking about. We’re literally talking about the difference here between the mature public market and the private market and everything in between, and that convergence. And you can broaden that. People will want to talk about tokenisation. They’ll want to talk about, we have new exchanges here like FCX, so there’s so much in between. But absolutely there are, and what we’re trying to make sure as ASIC is that at least we understand what those changes are. And is this dynamic and change? Is this distortion? Why is it happening? What part do we need to play in it?
Simon Rothery: I think one of the big question marks in relation to this question is there’s definitely a negotiated market in private markets. And for example, when somebody is selling an asset in a private market, but may own a similar asset in a public market, and the access to that information in the private market they get. And that obviously comes down to internal controls and Chinese walls. But I think that’s something that you have looked at and probably need to continue to look at.
Simone Constant: It’s actually genuinely, I mean, it was interesting to see what everyone’s responses were going to be earlier. But actually getting behind it, the things that folks seem to have been picking up on in themes, it’s really good to hear. I mean, we talked about the disclosure strike zone. I also heard Simon mention those principles. Again, if I gave you my top four or five pages from the hundreds of pages we did, those principles and those poorer practice, and we can spend more time on them later, they’re really important.
But also that message that Simon’s just picked up on, that we will continue to be observing where there’s touch points for big fund managers, big superannuation entities, others, where you’re touching public and private. And when we’ve got a rise in private markets where assets are transacting at the 20 plus billion, you’re thinking AirTrunk, you’re thinking airports, for example, that take privates. And actually those investors have public holdings where the valuation might be reverse affected. These days, it’s not just taking a public valuation and thinking about your private, it can go the other way. We are absolutely, we’ve written it down, again, with that being consistent on what we’ll do, we will continue to be supervising, looking closely at those transactions as part of our ongoing market supervision.
Facilitator: To guard against that distortion and conflict, I guess. So do you have anything?
Andrew Fraser: No.
Facilitator: I will go back to you, Andrew, though about superannuation funds coming up more and more in the conversation. What impact will continued growth have on the capital markets? And do you see any difference in perspective as you make your own career transition?
Andrew Fraser: So I have one week to go as Australian Retirement Trust Chair. My last public duty is to be accountable at the annual member meeting. So I can’t go the full run up here, but I might go a little way on the run up. I would make a couple of comments. One is, I think when you think of the sweep of time here, I’m old enough to remember when we had a national anxiety about a current account deficit, and the need for a source of domestic capital that would come into the country and help fund business, and the development of the economy in Australia. And then we’ve got one over the last 30 years. And ever since then, we’ve had this massive anxiety about the fact that we got what we wanted. We’re a bit like the dog that chased the bus and then caught the bus here, I think.
And so in that observation, I do think that we need to kind of level set on what the report actually said. The growth of superannuation, and concomitant to that, the growth in private markets is a good news story for Australia. And so if I think about that point that Jason just made about, where is the capital going to come from to generate what is needed for the Australian economy, then I think we need to just check ourselves about the idea that it’s sometimes the narrative that superannuation is a big part of the problem. I actually think it’s a big part of the solution.
And so is it a problem or a benefit that the register of the ASX 200 has a bunch of superannuation funds that are domiciled here in Australia, that represent Australian residents’ money, that are not going to be taken anywhere else, and are not trading in or out on a kind of daily basis in a substantive way, but are there as the patient capital that underpins the register? My answer to that is, that’s a good thing.
That doesn’t mean that the rest of the market can’t be active. That doesn’t mean that that’s a good thing. But I do think we need to just gain a bit of perspective here as in the way that we talk about ourselves, the regulator’s talked about, how do we talk about ourselves? And I think the way that we talk about super in this country at times doesn’t reflect the fact that when you go offshore and you meet people in market, they look at our superannuation system with envy, not with an idea that it’s a massive part of the problem.
So what does this mean for the future? It means this; that ultimately the flow that will come into the super sector over time as demography changes is going to be part of our national kit bag. And it doesn’t kind of escape me to make this observation that a lot of commentary in the last year or so has been about the need to have a different or improved or better access relationship with the new American administration for national security reasons, which is fundamentally important, and any nation should talk about this. And a big way that that was achieved was through the presence of Australian superannuation.
And so let’s kind of just remember that the team here and the idea of a national sovereignty debate is something that is real in this world. The other side of the discussion that was had yesterday is geopolitical risk is high. And so therefore, what is truly valuable to us as a community, as an economy, as a society, as a sovereign nation? And I’m going to say it’s two things; compulsory voting and superannuation.
Facilitator: And obviously there’s been more recently questions in the UK on that front as well. I mean, I think you’re right to highlight the US, but quite recently the UK government also asking these sort of questions, and feeling the presence of Australian super.
Andrew Fraser: And same through the neo-Pacific, right? So this is a way that we have to think about the future of this country in a different world. The answer to the challenges put in the last 24 hours are not just about defence assets. They’re about sports diplomacy. They’re about investment diplomacy. They’re about all of those things together. And I, for one, as I think about the way that we think about these things or that we talk about them, I think it’s time for us to level set.
Facilitator: What’s your view, Simon, of the role super’s playing in the capital markets?
Simon Rothery: I think the superannuation system, I said at the beginning, has fundamentally changed the way that capital is being formed and raised in Australia, and will only continue. Super has outgrown the growth in the equity market. There’s no more room in the ASX for super. It’s got to go offshore or it’s got to go into private markets. And we see that continuing. But we actually see that’s actually a good thing.
As Andrew said, I go around the world and I talk about the Australian business that we have, and the superannuation system in Australia is the envy of the world. We’ll outstrip the UK and Canada and become the second biggest pool in, I think, by 2030. And as Jason said, the banks have pulled back from lending, and I think super has a real role to play in public and private markets moving forward.
Simone Constant: You’d expect ASIC to just want to add, we’ve been very public. Super is a really positive force and here to stay, structural in markets. And we’re just building that into our work plan and how we approach things. And I really welcome that point about not being binary. Actually, in many ways, Andrew’s been talking today about taking vested interest hats off and not thinking you’re a unicorn, not being binary about things. So it’s from the market’s perspective.
But you’ll forgive an ASIC Commissioner for also saying, we’re also really focused on responsibilities of super funds to the members. So for all that this is a markets, capital markets discussion, we are also always conscious every day that the money is there for members, and those responsibilities to members and services need to be as paramount as the responsibilities, of course, to market and market integrity.
Facilitator: Absolutely. And just back to, I mean, one thing obviously the consolidation of the super industry has made the bets bigger, right? So that’s opened up a little bit of a gap at the bottom. Family offices have filled that to some extent. Has private credit got to be more active there as well, do you think below that super threshold?
Andrew Fraser: I’m happy to jump in with a couple of perspectives. I guess one is, I think one of the things to ask ourselves continually also is, is the growth of private credit also a function of the fact that we’ve got the regulatory settings for the way that banks lend in this country in the sweet spot? And so if at the margin, that credit is going to a private provision when in other jurisdictions, it might be provided through the public banking system, then I think there is a question for us to keep in mind as well.
I would probably go a little further than that and say, we need to make sure that in Australia, we don’t just have some really, really, really safe, big building societies. We actually need banks to be out there and providing the credit that supports growth.
I think one of the things here when we talk about where is the gap in the market is, we need to make sure that we’ve got enough agility in the market and enough capacity to enter into the market. Whether that’s banking, as John talked about earlier, or whether that’s super for new entrants to provide the competition pressure.
And just in referencing the previous regulator discussion, I do want to say this really clearly, which is, I think that our regulators in this country have done historically a very good job. They are a national asset. I think in the last while, they’ve listened to a debate and a discussion about where the regulatory settings are, and they’ve heard it, they’ve played it back, and I don’t think many people go out there and say, actually, well done to APRA, well done to ASIC for listening, but I would on this occasion. I do think it is on the participants next to step up to the plate, to walk through that open door and to walk through and have that discussion. John asked for some earlier examples. I’ve got a couple, but I won’t put them in this panel unless we want to get to that point at the end.
Simone Constant: Of risks to private credit, I actually think the risks to private credit are – and by the way, I actually would thank Andrew for the remarks. You don’t often get them, but you can hear –
Facilitator: It’s all very friendly here.
Simone Constant: Actually, we’ve really put ourselves out there, and this is pleasing to see that you often get a comment on the day something’s released, oh, industry welcomes it. But it’s whether they’re stepping up and into it and actually reading the materials. And you can hear and understanding the points and where the concern’s coming from and that’s travelling through. But risks to private credit, I actually think the risks to private credit in Australia are as much private credit itself, like themselves, the industry itself.
You probably expect me to say global contagion and the concerns that we’ve seen in the UK and in the US, and we’re really aware of that. And by the way, even though there’s differences here, and I’ll come to that, we’re very conscious financial engineering and leverage and system interconnectedness, like APRA, John was talking about earlier, it can bring it all together quickly and transmission can happen quickly.
That said, I think some of the unique features of Australian private credit are probably, as we’re seeing it at the moment, our areas of concern are the greatest risk to itself. Like the focus on property, our experts found that about 60% of private credit here is in property lending. Property’s great, and Australia is, the market is so much driven by property, but gee, that’s a concentration. And no crisis repeats, I always say that, but yet you need to learn from the crises, and we do know property, and levered property lending can quickly escalate in a crisis.
So I think a breadth, and if we get that breadth in terms of the offering and what is being financed, we’ll get a growth of maturity. The growth of maturity will be part in part the data. Like when we get better data collection and have more certainty about what it is, we will be able as regulators, for example, to even more confidently say, when done well, good for economy, good for borrowers, good for investors. And actually we might see more access of private credit, not just to property, but to businesses who want to be productive and want to grow.
And I think the third part is just the conduct part. And you’ve heard mentioned today, it was actually really good to hear that Simon mentioned those principles. Those 10 principles we’ve got in the private credit surveillance. Our expectation, I don’t think we said this publicly because I don’t think we felt we needed to, anyone who is in private credit, and actually to a degree even private equity – OK, I know you’re owners, I know it’s different to being a lender, I’ve been both – but some of those principles, they are not rocket science, but they are the law and they are guidance about fair treatment of investors. Transparency and proper governance over valuations, about your right policies when it comes to credit and liquidity management.
So those principles, you should be looking at your practices against them, because that’s how you’re going to get that confidence. And by the way, we’re going to be looking, like we’re going to be coming back and coming back to it.
And then I think to really shine a light on that and why I say so, I think, like I’ve mentioned parts of the report that I think are really important. And just forgive me, there is a little bit, I rarely do this, but because the words in the report speak so well themselves, I’ve been taking this with me everywhere. So pages 4 and 5 of the Private Credit Surveillance report – that’s why it looks so ratty – but because the team put so much effort into these words to show you what poorer practice looks like, I just want to do it justice and read a few of them.
So inconsistent and unclear reporting in terms. Well, what do we mean? We mean that whilst we looked at 28 funds, who were just meant to be representative, not the best, not the worst, by the way, OK, it looked like default range from 0% to 6%, which was Simon’s point about default. You get behind it and the variability and what default means can be anything from you’ve just missed a payment, through to basically you’re in enforcement.
OK, is that reliable? No, that does not give confidence. You look at opaque interest margins and fee structures, four of the 28 funds only published information about interest rates and charges charged to borrowers. And only one of the wholesale funds passed on the full economic benefits of the interest earned from its assets and borrower fees.
The other end of the spectrum, we saw one manager took a substantial interest margin of 7.5%. Again, with that inconsistency of practice, right? Consistency gives confidence. And just forgive me, two more that are worth talking about.
Less than half of the funds had detailed written credit or impairment and default management policies. Pretty important in credit funds. Half of the wholesale funds did not have a policy governing fair allocation of investment opportunities across multiple related funds. And finally, in terms of valuation and liquidity, most funds didn’t have effective separation between their IC that approved the loan and those that are responsible communities for overseeing loan performance and valuations. And only two of the eight wholesale, only two of them, formed stress testing as part of their liquidity risk management.
So that’s why we’re concerned, because those practices are concerning. And as I said, it was a representative sample to just think about the industry generally. we’re not specifically saying these funds that were surveilled are the particularly bad or particularly good ones. But when you see those practices, you see those growth rates, we’re sitting here talking about the importance of it to the economy, and then you think about the simplicity of those 10 principles, you can see why I say I actually think domestically the biggest risk to private credit is itself, and whether it seizes the moment to just get the practices consistently good.
Facilitator: Do you recognise that, Jason?
Jason Collins: That’s a long list. And it’s a very relevant list. And it makes me wonder across the value chain how it comes to being that these practices take place. As I said before, we don’t have any wholesale structures out available in private credit in Australia. And I think the sophisticated investors in the market, whether they be operating at the private advisory level or at the super fund level, are giving out larger sums of money and have a due diligence process which is really extensive.
And somewhere along the way, whether it be in the research house regime, whether it be in the platform regime, in the MIS regime, somewhere along the way, some of these practices have evolved, and you kind of look at it and say, well, that’s inconsistent with the policy settings, inconsistent with what we’re trying to achieve as an industry since the Royal Commission, the Productivity Commission. And so I think it’s great work by ASIC to have identified these things. It’s great work, the forward roadmap that’s been put forward. It’s very detailed, and as an industry it would be sensible for everyone to adhere.
Facilitator: We skirted around a bit, but public markets. I might turn to you here, Simon, but as a journalist, about once a year we write a story about what’s happening and IPOs, why aren’t there more of them? But my colleagues in other parts of the world write very similar stories sometimes. How do we make IPOs great again? Obviously ASIC’s tried to address this in the report. We’ve got some proposals on the table. What’s it going to take to move the dial on this?
Simon Rothery: Yeah, it’s a question, it’s a very good question, it’s a question we’ve been asking ourselves every day for about the last 10 years. I mean, in Australia, the value of the amount of equity raised in the last decade is down 82%, so it is significant. And I think that’s why I made the comments earlier. I think it was fantastic that the report not just focused on private markets, but how do we enhance and support public markets, and particularly public markets’ equity?
Because private markets are great and they’re going to keep growing in this country, but to me the public equity market is the foundation of the economy. Without a public market, a transparent and efficient, a liquid public market, that underpins everything.
And I think the example that we’ve seen of that in the last decade is the COVID era. Now, if we did not have an efficient functioning public equity market, we raised billions and billions of dollars of capital quickly, ASIC gave relief on certain things in terms of placement thresholds, private markets would not have been there in that timeframe, and businesses would have gone broke. And that’s the value of public markets. So we absolutely have to ensure that we have a public market which is as strong as a private market. And the two can coexist and converge, but public markets are vitally important to this country.
The ASIC report referenced the decline of public markets being sort of cyclical and structural. I think a little bit of it is cyclical. There’s certainly been money flowing out of equity markets because of high valuations into private credit. I would probably say that it’s a more structural issue, which I think we need to spend a lot of time on.
The IPO process, in terms of your question, it’s about efficiency and speed to market. And the IPO process has been too slow. Particularly in volatile markets, you have a very small listing window after you do all the work. If markets aren’t there, you can’t do the IPO, you lose investor confidence. The fast-track IPO process that ASIC has recommended, I think is very good. It’s going to obviously need consultation with the ASX. Things like promoting dual-track structures, I think will put us on a competitive playing field with offshore. Thinking about disclosure around forecasts and work around that. That makes boards very nervous in terms of the forward forecasts that have to go into an IPO prospectus.
Of course, we still have to ensure that investors are going to be as informed as they can be. Sell-side research, research analysts being able to engage with the company, with investment banks, and bankers working on the transactions so that the market again is fully informed. I think they’re all fantastic initiatives, and they will help the speed to market of IPOs, which is part of the problem.
I think the second big thing that we need to work on, which I don’t think has been addressed, and what puts most of our clients off IPOing, as opposed to a private transaction, is the ongoing red tape, compliance, governance, and regulatory concerns about being a listed public company. And that’s a massive issue. Most of our clients would prefer not to be public for those reasons. And I think there’s another leg of work to be done in relation to the efficiency and speed to market of IPOs, of actually the framework around being public.
Simone Constant: We, ASIC absolutely would agree with that. It’s not our job to pick market winners, and it’s not our job to make IPOs great again. But we are very invested in the idea of healthy public markets for all the reasons we’ve travailed. It’s not just about going on the boards, it’s staying on the boards.
So something that did come through really clearly in everything we did, whether it was Professor Carole Comerton-Forde’s work, through to the 100 responses we got, was it’s hard to grow at the moment in Australia as a listed entity.
And our Chair spoke beautifully last week about the differences between, what if you’re a smaller biostock trying to raise capital publicly on the listed market? The weight of what you face into – and it’s all there for very good reason. Compare that to, at the moment, wholesale funds which can raise billions and actually not be registered here and not be audited. It’s not for us to necessarily fix that at ASIC. But we did hear that, and we do, again, with that being accountable for what we heard and what we see, we do absolutely acknowledge that.
Facilitator: Andrew?
Andrew Fraser: I was just going to reinforce the point that Simon made. So I think the IPO pathway and what it takes to IPO is a really important focus, but it’s not the be-all and end-all. I think sometimes this debate turns into the prospectus and the actual IPO is the proposal and the wedding. We need to talk about the marriage. So once you’re there, what does it then take to keep invested in that? And I think that last point is the really important point. It’s get the IPO structure right, absolutely, and get those settings right. But what does it take to stay there is the much larger issue, in my view.
Facilitator: That’s interesting. Do you have a view, Jason?
Jason Collins: Well, public markets are a great democratiser. I mean, in Australia, we’ve got a really fortunate system with the superannuation system, where working Australians get access to public and private markets, and can generate wealth and store wealth for the future. But without public markets people can’t invest outside of super. It’s a lot harder, because private markets aren’t accessible yet, and Simone’s work and her team’s work is really important to try and open up the private market space.
But if you don’t have vibrant public markets that represent the broader economy, it’s really hard for savers to generate wealth outside of their super or house. I think 51% of Australians own shares directly. And as housing gets more expensive, a lot of younger Australians are turning to shares to save money to get their housing deposit. And there’s almost an inverse correlation between home ownership and share ownership, which has emerged since 2021, since COVID. It’s fascinating if you look at the stats, right? So Australia is below the OECD average in terms of home ownership, and really high up on the average on share ownership. So you just need a vibrant public market to make a more equitable society.
Facilitator: So how do you, I mean, to Simon’s point, you were just saying a lot of your clients don’t want to go public. And I’m thinking about this as well, because there seems to be a lot of volatility at the moment. Post earnings, obviously valuations, especially in larger cap companies are high, so you do get steam coming out. But if you are large, mid-sized, small, there are going to be different reasons. But how do we encourage more companies to make that step if they don’t seem to want to do it? And there’s capital available elsewhere that doesn’t cause so many headaches.
Simon Rothery: Yeah, I mean, there’s a good live example today. There’s a stock on the ASX that’s down 25% because the CEO sold his holdings last week and it was disclosed this morning. Now, there’s a very different regime in terms of director, management, founder, sell-down process, particularly in the US, where it’s a more consistent drip feed. I think we’re probably moving maybe towards that, and looking at that, but they’re those types of issues that scare people and scare investors.
And so I think we know what the issues are. We have good dialogue. It’s not just up to ASIC, though. It’s a number of regulators and exchanges, but they’re the types of issues that we need to be thinking about.
Simone Constant: And we are continuing to work in the space. Sell-side research was just mentioned by Simon. We’re actually about to be consulting on that because we’ve listened. It came through in this work, it came through in the simplification work. But I think what’s really interesting is all four, we’ve got four very different perspectives here and actually large and significant role. You’ve got the biggest, almost the biggest public and private investor at the end through super and through the investment bank that sees both sides. You can hear the commitment across the system that we need both, right?
For that access, for that participation, for the effectiveness of the system. We’ve just got to grasp the challenge. Like the whole point of the last two days has been about dynamism and grasping it. And we’ve got a productivity challenge step into it. We just got to step into it and not be binary. I think maybe Andrew’s is the catchphrase, right? Got to not be binary about this. We want both, we’ve got to pursue both and we’ve got to do it with maturity.
Facilitator: Excellent. Well, thank you very much to my panel. It’s a fascinating discussion, obviously very broad ranging, but I really appreciate all your time.
