ASIC blocks mortgage fund offers as private credit scrutiny intensifies

The restriction prevents ASCF from offering, issuing, selling, or transferring interests in its Premium Capital Fund, Select Income Fund, and High Yield Fund.

Together, the funds held $251.8 million in assets under management at 30 June 2026.

They invest in short-term mortgages secured against Australian property, spanning vacant land, residential, commercial, retail, and industrial assets.

ASIC said its intervention aimed to protect retail investors from purchasing investments through a disclosure document that could be defective or insufficiently clear, concise, and effective.

Portfolio disclosures under scrutiny

The regulator raised concerns about missing information on the funds’ loan portfolios and diversification metrics, alongside shortcomings in how the information provided was explained.

Its concerns also extended to a potentially misleading and deceptive statement, omitted information about the costs of disposing of fund interests, and inadequate disclosure of an investor reserve account intended to absorb impairments and capital losses.

Those issues place the information available to prospective investors at the centre of the intervention, including their ability to assess portfolio exposures, investment costs, and arrangements for dealing with losses.

ASIC commissioner Simone Constant said strong standards were essential across private credit, emphasising that disclosure should equip investors to assess the investments being offered.

“Firms must ensure their disclosures to investors are transparent and support informed decision making, including to help investors understand the strategies and risks of their products,” Constant said.

ASIC said it would consider final stop orders if its concerns were not resolved promptly.

ASCF will be able to make submissions before the regulator decides whether to impose final orders.

Wider crackdown gathers pace

The intervention emerged from ASIC’s surveillance of private credit funds, which examines how products reach retail investors through both direct sales and financial advice.

Its wholesale fund scrutiny also covers fees, margin structures, and the management of conflicts of interest, forming part of the regulator’s broader response to Australia’s changing capital markets.

Constant linked the ASCF action to that wider program, signalling that disclosure shortcomings would prompt intervention to protect investors and strengthen sector standards.

“As foreshadowed in all our work in the private credit space, where ASIC identifies disclosure concerns, we will act swiftly to protect investors from potential harm and promote higher standards across the sector,” Constant said.

The action follows ASIC’s June warning that poor practices in private credit remained an enforcement priority for 2026, with multiple investigations underway and surveillance progressing across retail and wholesale funds.

ASIC’s November 2025 surveillance report, covering 28 funds reviewed between October 2024 and August 2025, identified practices that could harm investors and the broader financial system.

The property connection is substantial, with ASIC’s September 2025 capital markets update estimating Australia’s private credit sector at around $200 billion, with approximately half invested in real estate-related activity.

[Related: Private credit body takes shape as scrutiny intensifies]