The Australian Securities & Investments Commission (ASIC) has issued interim stop orders against three managed investment schemes linked to Australian Secure Capital Fund (ASCF) amid concerns that retail investors may have been misled regarding key aspects of the funds. The affected schemes—ASCF Premium Capital Fund, ASCF Select Income Fund, and ASCF High Yield Fund—collectively manage approximately A$250 million, drawn exclusively from retail investors.
ASCF, operating since 2016, focuses on short-term mortgage investments, including bridging loans, and targets annual distribution rates ranging from 6.35 percent to 7.75 percent, with investment terms spanning three to 24 months. ASIC’s action comes after questions arose about the accuracy and completeness of the product disclosure statements provided to investors. Specifically, the regulator cited omissions related to the funds’ loan portfolios, potential misleading statements, and failure to disclose the costs involved in exiting the funds.
“Firms must ensure their disclosures to investors are transparent and support informed decision making,” ASIC Commissioner Simone Constant said, emphasizing the importance of clarity around investment strategies and risks. Constant noted that ASIC’s increased scrutiny of the private-credit sector would continue, with swift intervention expected where disclosure issues arise.
This move aligns with a broader regulatory focus on private credit investments, a sector that has faced mounting pressure amid concerns over liquidity strains and asset valuations. The private-credit industry has recently drawn heightened attention following a dispute between nonbank lender Metrics Credit Partners and its auditor KPMG over asset valuations. Metrics, which manages around A$20 billion in client funds, was compelled to suspend several of its funds earlier this month.
Following concessions to lower asset valuations proposed by KPMG, Metrics’ three ASX-listed funds have resumed trading after a brief suspension; however, its unlisted funds remain closed to investors. Metrics’ CEO Andrew Lockhart announced plans to review the firm’s governance processes and suggested the potential for remediation measures to protect investors affected by the valuation conflict.
The Australian Prudential Regulation Authority (APRA) also issued a warning last week about elevated risks linked to private credit investments within the country’s A$4.5 trillion superannuation sector. Notably, major superannuation funds such as Insignia Financial, Australian Retirement Trust, Rest Super, and Care Super hold significant exposures to Metrics Credit Partners, underscoring the sector’s systemic importance.
ASIC’s intervention in the ASCF schemes reinforces the regulator’s commitment to elevating standards in private lending and managing the evolving risks in this increasingly prominent segment of Australia’s financial market.