Private market investing is not a new phenomenon.  Most famously, David Swenson took the reins of the Yale endowment in 1985 and steered 30 years of strong outperformance by, among other tactics, reaping the benefit of the illiquidity premium by reallocating away from common public market equities and bonds to “alternatives” – including private markets in various guises.  That said, the last decade has seen private market investing proliferate beyond its traditional domain of institutional portfolios – and nothing better signifies this evolution than an increased regulatory focus on private markets.

Locally, ASIC released a discussion paper outlining a potential regulatory road map for private markets, including private credit, on the 26th of February 2025. This move signals an increasing focus on transparency, risk management, and investor protection within this subset of the industry. As yet, the regulator has not foreshadowed any changes to the legal framework regulating the Lender Borrower relationship. That said, this paper reflects the importance of private credit as a financing channel and the need for regulatory refinement.

At Harbour Credit Partners (HCP), we feel fortunate that the key areas of ASIC’s focus in reviewing the regulatory landscape within private markets are ones that we have already emphasised in the institutional grade policies and procedures that we have implemented for the benefit of our investors.  This paper will review four of these in the context of our current practices and how these put us ahead of any mandated policies that the regulator introduces.

1. Enhanced Transparency & Data Reporting

HCP has always prioritised transparency with our investors.  To now, we have shared complete details of the underlying loans into which we offer co-investment – details of Borrower/Sponsor, exit strategy, methodology in valuing the underlying security (complete with third party valuation report) – and have augmented this information with additional detail where sought by our clients.  We plan to continue this degree of transparency with the launch of the Harbour Credit Partners Diversified Mortgage Fund, with disclosures about this vehicle encompassing portfolio composition, sector exposure, and risk-adjusted returns. 

ASIC is considering whether private credit managers should provide more standardised reporting on portfolio composition, leverage, and risk metrics to improve market oversight.  Such mandated reporting will fall in line with our existing practices and would ensure that investors of all ilk benefit from the same transparency as clients of HCP.

2. Valuation and Conflict Management

Last month, we shared a letter detailing HCP’s approach to valuations, centred around rigorous internal analysis supported by independent third-party valuations. Our approach aims to develop a proprietary view of the ‘market clearing price’ for each asset at a given moment of time, overlayed with ongoing monitoring of those markets. We believe our process ensures thorough oversight in pricing potentially illiquid credit exposures.

Extending on this, the firm’s broader governance framework includes strong conflict-of-interest policies which help to ensure independent decision making between credit origination, risk management and investor representation.

ASIC has proposed greater scrutiny on how private credit funds value their illiquid assets and manage potential conflicts of interest.  With the former, our process ensures that the input of an independent valuation is married with a proprietary view that reflects a contemporaneous market.  While the latter tends to be focused more on multi-sector operators (such as those investing across the capital structure), we have alleviated any cross contamination between channels that might bring independence into question within our governance structure.

Furthermore, to date, our GP has been the single largest investor across our transactions.  While this may not always be the case, we will continue to maintain a significant coinvestment alongside our LPs on a structurally identical basis.  Although this may not align precisely with the conflict mitigation measures ASIC encourages managers to adopt, we believe it meaningfully demonstrates our alignment with our investors.

3. Liquidity and Investor Protections

At HCP, we structure our funds with investor liquidity terms that align with the underlying real estate-backed credit exposures. Our lending approach favors assets that are marketable in their current use and liquid markets, targeting greater stability even in turbulent markets.  We will also maintain contingency planning for market dislocations, ensuring that investor withdrawals do not disrupt portfolio integrity.

ASIC’s paper raises concerns about the potential mismatch between fund liquidity and loan duration; commensurately, the regulator is exploring whether additional safeguards are required in order to ensure that funds align liquidity terms with the underlying credit portfolio.  Such measures would bring the industry writ large in line with the practices that HCP will implement in the Harbour Credit Partners Diversified Mortgage Fund in its approach to liquidity and duration management.

4. Retail & Wholesale Investor Criteria

In line with the broadened use of the private credit in investor portfolios beyond large institutions, discussions around investor qualification and product distribution have evolved.  At HCP, we remain committed to best-in-class compliance. The firm rigorously adheres to Australia’s Design and Distribution Obligations (DDO) to ensure that our credit strategies are accessible only to sophisticated investors with appropriate risk tolerance. Our investor communications emphasise risk disclosures, ensuring transparency in product suitability.

As outlined in their paper, ASIC is toying with possible adjustments to investor qualification thresholds and more stringent disclosure requirements for private credit funds accessible to non-institutional investors. HCP’s culture and the practices we have already put into place in engagement with our investors will ensure that any movement from ASIC in this realm will segway into our existing policies and procedures.

What This Means for Investors

While regulatory frameworks are still under discussion, one thing is clear: private credit is being increasingly recognised as a mainstream institutional asset class. This evolution underscores the need for discipline, transparency, and robust risk management—principles that have always been core to HCP’s approach.

We believe these discussions will ultimately strengthen investor confidence in private credit by setting clearer industry standards. HCP welcomes this progress and remains fully aligned with the long-term sustainability of the asset class. As always, we will continue to engage with regulators, industry bodies, and our investors to ensure that our approach remains ahead of regulatory developments.

We appreciate your continued trust in the firm. If you have any questions or would like further insights into the evolving landscape, please reach out to our investor relations team.

About Harbour Credit Partners

Harbour Credit Partners is a Sydney-based private real estate loans manager and a joint venture with the IJD Group, our capital partner.  Wholesale investors are eligible to coinvest in loans settled by the HCP investment team and funded via the IJD Group’s balance sheet, or to invest in a diversified pool of underlying loans via the Harbour Credit Partners Diversified Mortgage Fund.

For a complete list of HCP’s current active loan portfolio (including those opportunities where the capacity available to external investors has not been exhausted), please access the following link:

https://harbourcreditpartners.portal.agorareal.com/#/public/offerings

Jonathan Goll 
Head of Investor Solutions
M: +61 438 082 247
E: jgoll@harbourcreditpartners.com

Any information or advice contained in this newsletter is general in nature and has been prepared without taking into account your objectives, financial situation or needs. Before acting on any information or advice in this newsletter, you should consider the appropriateness of it (and any relevant product) having regard to your circumstances and, if a current offer document  is available, read the offer document before acquiring products named on this website. You should also seek independent financial advice prior to acquiring a financial product.

All financial products involve risks. Past performance of any product described in this newsletter is not a reliable indication of future performance.

Harbour Credit Partners Pty Ltd is the Investment Manager of the Harbour Credit Partners Master Trust. It holds a Corporate Authorised Representative authorisation CAR No.001308393 from Quay Wholesale Fund Services Pty Ltd (Quay) (AFSL No. 528 526). Harbour Credit Partners Pty Ltd also holds a Corporate Authorised Representative authorisation from Quay allowing it to provide General Product Advice.