This week, the Australian financial services landscape was dominated by a significant escalation in regulatory scrutiny over market structures and private asset valuations, running parallel to unabated innovation in investment products. As institutional capital continues to flood into private markets, the corporate regulator, ASIC, has sharpened its focus on ensuring transparency and fairness for investors. This tension between innovation and oversight was evident as superannuation funds deployed capital into new-age strategies and global markets. At the same time, ASIC launched major inquiries and enforcement actions to safeguard market integrity and protect consumers.
Private Markets Under the Microscope
The explosive growth of private markets is forcing a major rethink of valuation practices and regulatory oversight, a theme that reverberated through the industry this week. The Future Fund's chief executive, Dr Raphael Arndt, made a strong case for the superiority of public markets in providing transparent price discovery, stating, "[we] would pick public every day of the week](https://www.superreview.com.au/news/superannuation/we-would-pick-public-every-day-week-says-future-fund-ceo)". This view was echoed by market participants calling for clearer principles on valuation, particularly as institutional investors increasingly view private market allocations as strategic necessities.
ASIC has firmly entered the debate, with Commissioner Simone Constant informing asset managers regarding their valuation methodologies and fee disclosures in the booming private credit sector. In a direct warning, Constant highlighted concerns that valuations may not keep pace with public market volatility, stating, "We should all be asking tough questions about unlisted assets' value”. This regulatory focus is validated by new research showing a surge in super fund and institutional appetite for private assets, with one-third of assets held in private markets by 2022. The allure is also capturing retail attention, with surveys revealing many Australians are feeling 'fear of missing out' on private market returns. To help advisers navigate this complex space, Coller Capital has launched a new secondaries education platform.
Regulatory Front: ASIC Intensifies Market Oversight
ASIC has significantly ramped up its enforcement and supervisory activities, launching a formal inquiry into the Australian Securities Exchange (ASX). The inquiry will investigate the ASX’s governance and risk management controls, following years of challenges, most notably the abandoned CHESS replacement project. This move signals the regulator's low tolerance for operational failures at critical market infrastructure providers.
The regulator's crackdown extended to market participants and influencers. As part of a global campaign, ASIC put 18 'finfluencers' on notice, warning that their social media promotions may constitute unlicensed financial advice. In more direct enforcement, ASIC cancelled the Australian Financial Services (AFS) licence of Financial Services Group Australia and permanently banned its responsible manager. This followed an investigation into the firm’s connection with the failed Shield and First Guardian Master Funds. In a separate action, ASIC took Australian Fiduciaries to court, seeking to place the managed investment scheme's responsible entity into receivership.
Product Innovation and Industry Shifts
Despite the regulatory headwinds, product innovation continues apace. In a notable development, UniSuper has backed a new AI-driven quantitative long-short strategy developed by RQI Investors. The RQI Investors fund will invest in ASX 300 stocks, leveraging artificial intelligence to identify investment opportunities. On the platform front, Netwealth has added an ActiVam separately managed account (SMA) range, broadening the investment options available to advisers.
Superannuation funds continue to expand their global footprint, with HESTA backing a Heitman-led European property expansion. However, this expansion comes with warnings. Australian Retirement Trust (ART) has cautioned against regulatory overlap in the super sector, while the Future Fund has highlighted the growing risks posed by foreign exchange volatility amid geopolitical instability.
The funds management sector also sees potential consolidation, with merger talks between L1 Capital and Platinum Asset Management reportedly inching closer. However, a key listed investment company (LIC) has opposed a potential conversion that could be part of the deal.
Looking Ahead & Takeaways
This week's focus on private market valuations and the integrity of market infrastructure is a direct continuation of themes observed over the previous quarter. We have seen consistent warnings about ESG disclosure and DDO in previous weeks, with ASIC stating it will take a deep dive into the operational resilience of the ASX and the valuation practices within unlisted assets. The pattern is clear: as capital flows into more complex and opaque areas of the market, regulatory intervention follows. The launch of ASIC's inquiry into the ASX represents a significant escalation, moving from product-level scrutiny to examining the very architecture of the market.
Key Actionable Takeaways:
- For Advisers (0-3 months): With ASIC scrutinising private asset valuations, you must intensify due diligence on private credit or private equity products. Utilise new resources like Coller Capital’s education platform to deepen your understanding and be prepared to justify your recommendations with robust evidence of fair value.
- For Product Providers (0-3 months): Urgently review your valuation policies for unlisted assets to ensure they align with ASIC’s heightened expectations for transparency and independence, as outlined by Commissioner Simone Constant. Ensure any ESG or sustainability claims can withstand scrutiny, following the lead of global regulators.
- For Licensees (3-12 months): The ASIC inquiry into the ASX and actions against other licensees are a signal to review your firm’s overarching governance and risk management frameworks. This is no longer just about product compliance; it's about your entire business's operational and structural integrity.
