ASIC has lifted an interim stop order on the 12 Month Term Account and 2 Year Account offered under La Trobe’s Australian Credit Fund, while a stop order on its US Private Credit Fund remains in place, with La Trobe and the regulator still in discussions.
“I’m pleased to confirm that our award-winning La Trobe Australian Credit Fund is back open for investment,” La Trobe chief investment officer Chris Paton said in a video message to investors and advisers.
“There is no action required from you as an existing investor of La Trobe Financial, everything remains as it was before and you can make additional investments in the same way you always have. I’m also pleased to let you know that our online investment platform, La Trobe Direct, is back online and fully operational.
“This outcome and the speed with which we were able to achieve it reflects our commitment to transparency, compliance and putting our investors at the heart of everything we do. As we said we would, we worked closely with ASIC to address their requirements and we’re pleased to have satisfied all regulatory obligations.”
The stop orders, made on the basis that the funds’ target market determinations suggested an “inappropriate level of portfolio allocation” given their risks, came amidst a wave of anxiety about the quality and transparency of the Australian private credit sector Australia and were quickly followed by an ASIC report into it.
That report, released on Monday, called for a lift in standards across four areas: conflicts of interest, fees and remuneration, portfolio transparency and valuations, and terminology. It also highlighted fee incentives, net interest margin capture, related party transactions and multiple capital stack exposures as conflicts of interests.
“Some managers retain 50–100 [per cent] of upfront and other fees paid by borrowers or default-related fees,” the report said.
“In borrower negotiations, this structure could be in conflict with maximising the interest margin to the benefit of the fund investors. In some cases, interest could potentially be paid from the loan capital.”
Frontier Advisors – an influential asset consultant to profit-to-member super funds, which the ASIC report said were largely playing in a part of the market that demonstrated “good operating practice” – said in its own report that the risks the regulator highlighted largely in real estate construction and development finance, a market segment that “remains highly concentrated and largely untested through a full economic cycle”.
The Frontier report also called out valuation practices and liquidity management, saying that funds targeting retail investors “may face challenges in managing liquidity, including the risk of distributions being paid from capital without sufficient disclosure”.
“Private credit remains a key component of the investment landscape, but it comes with complexities that demand rigorous oversight,” Frontier director of research and specialist services Paul Newfield said.
“By helping investors and platforms implement stronger practices, we seek to bolster market confidence and ensure our clients are well-informed when accessing private credit opportunities.”
Separately, Metrics Credit Partners’ ASX-listed Income Opportunities Trust and Master Income Trust were downgraded by Lonsec in early September, with the influential ratings house identifying governance concerns including material related-party transactions, lack of separation between debt and equity committees, and lack of transparency.
