Private Credit Risks in Australia: How to Read a Fund's RG 45 Report
Investors and capital providers · Private credit and mortgage schemes · Risk and disclosure guide
Most guides to private credit risk are written by people selling a fund. This one works from what the regulator published. ASIC has surveyed the sector twice, named the risks, and set 8 disclosure benchmarks that an unlisted mortgage scheme reports against. If a fund has handed you a report, this explains what it says, what it is allowed to leave out, and what a benchmark marked not met actually tells you.
Quick Answer
In Australia, ASIC names six private credit risks: borrower default, valuation uncertainty, opacity, conflicts of interest, illiquidity and leverage. For an unlisted mortgage scheme in which retail investors invest, RG 45 sets eight benchmarks and eight disclosure principles showing where those risks appear in the disclosure. A benchmark marked "not met" is not automatically a breach; the explanation is the part to read.
Also called: private debt risk, mortgage scheme due diligence, RG 45 benchmark report, private credit default risk.
| Your question | Short answer |
|---|---|
| What are the risks? | ASIC names 6: borrower default, valuation uncertainty, opacity, conflicts of interest, illiquidity and leverage. Security over property reduces loss, it does not remove it. |
| What are default rates? | ASIC reported the funds it surveyed disclosed defaults generally in a 0 to 6 per cent range of the loan book, and found in the same report that funds define default differently, so the numbers are not comparable between funds. |
| What must a fund tell me? | Where retail investors invest, a Product Disclosure Statement and a target market determination. For an unlisted mortgage scheme, ASIC also expects disclosure against 8 benchmarks and 8 disclosure principles. |
| Why does my report show 5 benchmarks, not 8? | Because 2 of the 8 apply to pooled schemes only, and RG 45 lets a responsible entity treat others as not applicable where the scheme's structure means they cannot apply. Fewer than 8 is not automatically a gap. |
| What does "not met" mean? | That the benchmark is not fully met, and the responsible entity has explained how it deals with the underlying issue another way. ASIC states there is no partial pass, so the explanation is the disclosure. |
| What is a fund allowed not to tell me? | Its liquidity cash flow estimates, and the names of its largest borrowers. The proportion lent to the largest borrower and the 10 largest borrowers must still be disclosed. |
| How do I check the fund is real? | ASIC's professional registers carry AFS licensees and registered schemes, and AFCA publishes its own member list. A licence is a point-in-time assessment, not a quality rating. |
| My money is already stuck. What now? | A freeze is often a protective measure rather than proof of a loss. Check the controlling withdrawal rule and ask about hardship first. Complain to the responsible entity if needed; AFCA can consider some individual investment complaints against member firms, but generally cannot consider the management of a fund or scheme as a whole. |
| What am I actually paying? | More than the management fee. ASIC records that non-disclosed remuneration can be a multiple of 3 to 5 times the publicly disclosed fund management fee, because managers can also be paid by borrowers. |
| Is anyone checking it suits me? | For a retail fund, the responsible entity publishes a target market determination and distributors must take reasonable steps to match it. That regime does not apply to wholesale funds. |
| Is there compensation if it fails? | No scheme compensates you because a fund failed. The Compensation Scheme of Last Resort covers unpaid AFCA determinations in 4 sub-sectors, and operating a managed investment scheme is not one of them. |
| Is my money guaranteed? | No. The Financial Claims Scheme protects deposits with APRA-licensed banks, building societies and credit unions. A scheme interest is not a deposit. |
What are the risks of private credit in Australia?
ASIC names 6: opacity, conflicts of interest, valuation uncertainty, illiquidity, leverage, and the underlying credit risk that borrowers fall behind or fail to repay. ASIC's consumer guidance puts the last one plainly, stating that "Even if assets secure the loans, you can still lose money". Security changes the recovery, not the outcome.
That list is worth reading twice, because 5 of the 6 are not about borrowers at all. They are about the manager: what it tells you, whose interests it serves, how it values what it holds, whether you can leave, and whether it has borrowed on top. A fund can hold a perfectly serviceable loan book and still cost an investor money through any of those 5. Category orientation across the wider sector sits in the private credit funds guide.
| Risk | What it means | Where it shows up in the disclosure |
|---|---|---|
| Credit risk | Borrowers fall behind or fail to repay, which reduces the value of the loans in the fund. Assets securing the loans reduce the loss, they do not prevent it. | Disclosure Principle 3, loans in default or in arrears more than 30 days, and the maturity profile |
| Opacity | Private loans do not trade on public markets, so there is no external price and no independent record of what a loan is worth or how it is performing. | Disclosure Principle 3 as a whole, and the loan-to-valuation ratios and interest rate ranges within it |
| Conflicts of interest | The manager can be paid by the borrower as well as by you, and can lend to parties related to itself. Both change whose interest the loan serves. | Benchmark 4 and Disclosure Principle 4, related party transactions, and the fee sections of the Product Disclosure Statement |
| Valuation uncertainty | The value of a loan and of the property behind it is an assessment, made on instructions, on a date. Two funds can value the same kind of asset differently. | Benchmark 5 and Disclosure Principle 5, valuation policy, and Benchmark 6 on loan-to-valuation ratios |
| Illiquidity | You cannot always take your money out. In a scheme that is not liquid, exit runs through a withdrawal offer made by the responsible entity, not on request. | Benchmark 8 and Disclosure Principle 8, withdrawal arrangements, and Benchmark 1 on liquidity for pooled schemes |
| Leverage | Where the scheme itself borrows, the borrowing ranks ahead of investors and magnifies both the income and the loss. | Benchmark 2 and Disclosure Principle 2, scheme borrowing, and Benchmark 7 where distributions are funded from borrowings |
What is not sitting behind any of them
No government guarantee. The Financial Claims Scheme protects deposits up to $250,000 per account holder per APRA-licensed bank, building society or credit union incorporated in Australia. APRA states that it does not apply to branches of foreign banks, foreign branches of Australian banks, or "finance companies and other financial institutions that are not licensed (authorised) by APRA". A mortgage scheme is not an authorised deposit-taking institution and money invested in one is not a deposit, so none of the 6 risks above is backstopped. ASIC makes the same point from the other direction, describing fixed income and mortgage investment products as riskier than bank term deposits because the issuer may not be well capitalised, covered by the scheme, or supervised by APRA.
The right-hand column of that table is the point of this guide. Every named risk has a place in the disclosure where a fund has to say something about it, which means the disclosure is not a formality to be skimmed on the way to the return figure. It is the only structured account of those 6 risks you will be given. What that structure is, and where it stops, is covered in the sections below.
What is an RG 45 report for a mortgage fund?
What investors often call an RG 45 report is the scheme's benchmark and disclosure statement prepared under ASIC Regulatory Guide 45. For an unlisted mortgage scheme in which retail investors invest, it tells you which applicable benchmarks the scheme meets, which it does not meet, and the disclosure information sitting behind those statements. It is disclosure, not an ASIC rating, approval or recommendation.
RG 45 separates two things that are easy to mix up. The 8 benchmarks produce a met or not-met statement on an if not, why not basis. The 8 disclosure principles require information about the same subjects, including liquidity, borrowing, the loan portfolio, related parties, valuations, loan-to-valuation ratios, distributions and withdrawals. A scheme can therefore tell you a great deal even where a benchmark is marked not met.
For a retail unlisted mortgage scheme, ASIC expects the benchmark disclosure in the Product Disclosure Statement, within the first 15 pages and set out in a table, followed by ongoing disclosure that is updated when material changes occur and refreshed at least half-yearly. If you were handed a document months ago, the useful question is not only what it said then, but whether a newer disclosure now exists.
What should you check first in a private credit fund document?
Start with seven lines before you read the return figure: arrears, capitalised interest and restructures, borrower concentration, valuation basis and date, withdrawal terms, the source of distributions, and the manager's total remuneration. Together they tell you whether cash is actually arriving, whether stressed loans are being extended rather than labelled default, how concentrated the risk is, how current the asset values are, how easy it is to leave, whether distributions are supported by underlying cash flow, and whether the headline fee is the whole fee story.
| Find this line | What to look for | Why it matters |
|---|---|---|
| Defaults and arrears | The fund's definition of default, plus the proportion of loans in default or more than 30 days in arrears where that disclosure applies. | A low headline default rate can mean little if the manager uses a narrow definition. Arrears puts a time threshold around loans that are not paying as expected. |
| Capitalised interest, amendments and restructures | Loans where interest is added to the balance instead of paid in cash, and loans whose maturity, covenants or other terms have been amended, extended or restructured. | A loan can avoid being labelled a default while cash stops arriving or its original repayment terms change. These lines help separate income accrued on paper from cash received and identify stress that may sit outside the headline default rate. |
| Largest borrower and top-10 concentration | The percentage of the loan book or scheme assets exposed to the largest borrower and the largest group of borrowers. | A fund can contain many loans and still depend heavily on one borrower, group or property cycle. |
| Valuation basis, date and independence | Whether security is valued as is or as if complete, when it was valued, who instructed the valuer, and how independent review or rotation works. | An older or on-completion valuation can produce a lower-looking loan-to-valuation ratio without changing the amount owed. |
| Withdrawal terms and liquidity controls | Lock-ups, notice periods, withdrawal offers, caps, queues, gates, suspension rights and any dependence on an underlying feeder fund. | The return only matters if the terms let you access your money when you expect to. The controlling wording is in the scheme documents, not the marketing summary. |
| Source of distributions | Whether distributions are supported predominantly by cash flows received from underlying assets, and whether the fund may rely on borrowings, investor capital, new subscriptions or non-cash accrued income. | A steady distribution does not by itself prove the underlying loans are paying cash. ASIC's surveillance found the fund reports it reviewed omitted information on the source of distributions paid, so this is a question to put directly to the manager. |
| Manager remuneration | The management fee plus borrower-paid establishment, origination, extension and default fees, retained interest margins and income through interposed vehicles. | ASIC found that the headline management fee can materially understate what the manager receives in connection with running the fund. |
If one of those lines is missing, the next step is not to guess. Ask the responsible entity or trustee for the current figure, the definition behind it and the date it was measured. Whether the answer is documented, current and consistent with the offer document is itself useful information.
What should you do after the first seven checks?
The next move is verification, not more reading. Once you know what the document says, check that you are reading the current document for the right legal entity, turn every missing number or definition into a written question, and then follow the path that matches whether you are still deciding or already invested.
- Identify what you actually hold. Is it a retail registered scheme, a wholesale fund, a pooled scheme, a contributory interest or a feeder fund? That decides which disclosure and withdrawal rules are relevant.
- Check the date. Find the current PDS, RG 45 benchmark disclosure or information memorandum rather than relying on the version attached to an old email.
- Verify the parties independently. Check the exact scheme, responsible entity or trustee, AFS licensee or authorised representative and AFCA membership using the public-register steps below.
- Write down what is missing. Ask for the current figure, the definition behind it and the measurement date. "Not disclosed" and "not available" are different answers, and both are information.
- If you already invested, compare then with now. Compare the current arrears, capitalised interest, restructures, valuations, concentration, source of distributions and withdrawal terms with the disclosure that existed when you invested.
- If access to money has changed, identify the mechanism. A delay, cap, queue, gate and freeze are not interchangeable. Go to the withdrawal section and work from the notice and controlling scheme document.
What did ASIC find when it reviewed private credit funds?
ASIC surveyed the sector twice and found the same theme both times: the numbers investors are shown are not comparable between funds, and in several areas are not shown at all. The first review, published 22 September 2025, examined the market and its practices. The second reviewed 28 funds, 20 retail and 8 wholesale, between October 2024 and August 2025, and published its findings in November 2025.
The market ASIC was looking at is estimated at $200 billion in assets under management, with domestic private credit funds accounting for around 70 per cent of loans outstanding. ASIC attributes the growth to superannuation savings seeking diversification and yield, moderation in bank lending to higher-risk real estate ventures, and increased retail participation through evergreen and exchange-traded products.
| Document | What it is | Date |
|---|---|---|
| Report 814, Private credit in Australia | Commissioned research on operating practices. Identifies 4 areas needing improvement: conflicts of interest, fees and remuneration, portfolio transparency and valuation, and terminology | 22 September 2025 |
| Report 820, Private credit surveillance | The surveillance of 28 funds, setting out better and poorer practices across 7 focus areas, and containing the 10 principles | 5 November 2025 |
| The 10 principles for private credit done well | Published inside Report 820 as Table A. ASIC states that individual fund operations should be benchmarked against them | 5 November 2025 |
| Report 821, on private capital market reporting | Finds Australia lags peer jurisdictions on private capital reporting and disclosure | November 2025 |
| Report 823, the capital markets roadmap | ASIC's response to its own discussion paper. Signals further targeted surveillance of funds management, including private credit funds with a real estate lending strategy, focused on distribution, fees, margin structures and conflicts | November 2025 |
| The private credit fund catalogue | A catalogue of key legal obligations and related ASIC guidance for private credit funds, issued in a retail version and a wholesale version | 9 December 2025 |
| Regulatory Guide 181, managing conflicts of interest | ASIC's conflicts guidance for licensees, updated in the same cycle | Updated 16 December 2025 |
Six of those 7 arrived within 6 weeks of each other. A fund disclosure that has not moved since before November 2025 predates the whole package.
Fees, and the question ASIC asked about them
The sharpest finding is about money the manager receives that never appears in the management fee. Borrowers pay fees to have a loan arranged: origination, establishment, early repayment, extension and default fees. Where those are kept by the manager rather than passed to the fund, ASIC found that headline management fees can significantly understate the manager's total remuneration for running the fund, that this makes direct comparison between funds difficult, and that some investors may therefore not know the true cost of the fund. The regulator's own framing of the issue is that "it's reasonable to ask whether information is not being disclosed", which is the same test RG 45 applies to the benchmarks.
The surveillance report put numbers against it. Only 4 of the 28 funds published information about the interest rates or ranges charged to borrowers, and only 3 retail funds clearly disclosed in the Product Disclosure Statement all sources of loan fees received by the responsible entity, trustee or investment manager. So on the funds ASIC looked at, what the borrower pays and what the manager keeps out of it are each disclosed by very few.
Governance, impairment and reporting
Three further findings bear on whether a number in a report can be trusted. Most funds reviewed did not have effective separation between the investment committee approving loans and the people responsible for monitoring how those loans perform and are valued afterwards. Fewer than half, 7 retail and 5 wholesale, had detailed written credit or impairment and default management policies in place, which ASIC linked to concerns that credit risk is not properly managed across the market. And ASIC recorded a concern that private credit fund reporting may not give investors a true reflection of non-performing and distressed fund assets.
What ASIC says good periodic reporting contains, and how many funds delivered it
Its commissioned research set out a working template for what a private credit fund could disclose in periodic reporting. It runs to 9 items: investment returns over 1 month, 3 months, rolling 12 months and since inception, before and after fees; the number of loans in the portfolio; the number of loans greater than 5 per cent of portfolio value; a summary of the geographic spread; the number of loans in arrears; the time period in arrears; the number of loans using payment in kind and the proportion of the portfolio by value; the proportion of distributions paid from cash income from investments and from other sources; and fund gearing.
ASIC then reported that no fund in its review disclosed all of that information in its periodic reports. Two omissions were universal rather than common: every fund report left out the source of distributions paid to investors, and no fund provided statistics on loans using payment in kind where payment in kind appeared to be offered. Those are the 2 items that separate income received from income accrued, which makes their absence the most informative thing about the set.
ASIC returned to the subject on 18 June 2026, ahead of the 30 June valuation and reporting cycle, stating that "Tighter liquidity, emerging borrower stress and signs of credit deterioration are testing valuations", governance and investor disclosures. It also recorded that retail and superannuation exposure is increasing, that credit deterioration is emerging unevenly with pockets of higher defaults, impairments and loan amendments, and that redemption requests remain contained in aggregate. Poor practices in private credit are a 2026 enforcement priority.
What are you actually paying a private credit fund?
More than the management fee, and ASIC has quantified the gap. Its surveillance report records the finding from its commissioned research that "Non-disclosed remuneration can be a multiple of three to five times the publicly disclosed fund management fee". That is the single most useful sentence published about private credit costs in Australia, and it means the number in the fee table is not the number.
The reason is structural rather than sinister. A private credit manager sits between 2 paying parties. Investors pay a management fee. Borrowers pay to have the loan arranged and kept alive, and they pay interest. Where the manager keeps part of what the borrower pays instead of passing it to the fund, that money is real remuneration for running the fund and it does not have to appear as a fee unless the manager chooses to present it as one.
| What the manager receives | Who pays it | What ASIC found about disclosure |
|---|---|---|
| Management fee | The fund, out of investor money | Disclosed. Across the 28 funds reviewed it ranged from 0.38 to 6.00 per cent for retail funds and 0.00 to 2.89 per cent for wholesale funds. |
| Borrower fees | The borrower | ASIC names origination, loan establishment, early repayment, extension and additional default fees. Half of the retail funds, 10 of 20, disclosed in the Product Disclosure Statement that the manager might receive them, with no consistency in how they were disclosed, treated or quantified. |
| Net interest margin | The borrower, as the gap between the rate charged and the rate paid to investors | Most funds did not disclose interest rate statistics to investors at all. Of the 4 wholesale fund managers that retained a margin, 3 disclosed the additional income and only 1 quantified it. |
| Default income | The borrower, through default fees and penalty interest | ASIC found some managers retained all or part of the additional default income without classifying it as a fee attributable to investors. One wholesale fund retained it in full, from the investors carrying the credit risk of non-payment. |
| Income earned through interposed vehicles | The borrower, via a special purpose vehicle or other structure between investor and borrower | ASIC has said it plans future surveillance of how structures such as special purpose vehicles can obscure the incentives of fund operators. |
The rate the borrower pays is a risk signal, and almost nobody publishes it
Across the 28 funds ASIC reviewed, interest rates charged to borrowers ran from 2.50 to 33.51 per cent in retail funds and from 8.00 to 41.66 per cent in wholesale funds. ASIC attributes the top of those ranges to unsecured lending and to penalty rates applied to loans already in default. Only 4 of the 28 funds published any information about the rates or ranges they charged.
That matters to an investor for a reason that has nothing to do with fairness to the borrower. A higher rate charged is the lender's own assessment that the loan is riskier. Where a fund will not tell you what it charges, it has withheld its own risk pricing, and ASIC states the consequence directly: investors cannot assess the risk, and cannot judge whether they are being compensated for it. The findings on how these funds are structured and offered sit alongside this one.
ASIC's commissioned research identified 4 areas of the market needing improvement, and 2 of them are this one: conflicts of interest, and fees and remuneration, alongside portfolio transparency and valuation, and terminology. The regulator's own framing of the disclosure question is worth borrowing, because it echoes the test RG 45 applies to the benchmarks: it is reasonable to ask whether information is not being disclosed, and if not, why.
What are ASIC's 10 principles for private credit done well?
ASIC published 10 principles in November 2025 and told the market to measure itself against them. They appear as Table A in Report 820 and are carried into Report 823 as its private-credit principles. ASIC states that individual fund operations should be benchmarked against the principles and better practices, and in June 2026 it went further, expecting boards, auditors and participants across the private credit system, including responsible entities, trustees and chief investment officers, to assess current practices against them and lift standards where needed.
They are reproduced below in ASIC's own order and under ASIC's own names. They are the regulator's benchmark for fund operators, not a rating tool and not a scoring sheet, and a fund is not obliged to report against them the way it reports against the RG 45 benchmarks. What they do give an investor is the vocabulary ASIC itself uses for what a well-run private credit fund looks like.
| Principle | What ASIC says it covers |
|---|---|
| 1. Stewards of other people's money | Responsible entities and trustees act as stewards of investor capital, with decisions that are fair and in investors' best interests, and boards that actively oversee valuations, conflicts, liquidity and impaired assets. |
| 2. Organisational capability | Human, financial and technological resources are adequate, with expertise in credit, risk, compliance, valuation, reporting, liquidity and conflict management, reviewed as the fund grows. |
| 3. Transparency | Investors have timely, transparent information on strategy, exposures, valuations, risks and fees, with consistent reporting practices and terminology. |
| 4. Design and distribution | An appropriate target market that reflects any high-risk or complex features, and distribution oversight strong enough to keep the product with the investors it was designed for, including through platforms. |
| 5. Fees and costs | All fees and income streams disclosed, including borrower-paid fees, origination margins and default interest, with clarity about the manager's total remuneration and no structures that obscure the true cost. |
| 6. Conflicts of interest | Conflicts identified, disclosed and managed or avoided, with related party transactions and multiple exposures to the same borrower disclosed and independently overseen. |
| 7. Governance | Defined roles, decision-making and escalation, boards independent of the business, and structures kept simple enough that complexity does not itself create conflicts. |
| 8. Valuations | Fair, timely and transparent valuations on a regular monthly or quarterly cycle, with appropriate independence and periodic external audit. |
| 9. Liquidity | Redemption terms, liquidity gates and stress testing disclosed, and distributions funded predominantly from cash flows generated by the underlying assets rather than from investor capital. |
| 10. Credit risk | Credit risk managed across origination, portfolio construction, monitoring, impairment, default and repayment, with documented decisions, escalation protocols for early distress and independent oversight. |
Principle 9 carries the sharpest line for anyone holding units already. ASIC's stated expectation is that the source of a distribution is sustainable and comes predominantly from cash flows generated by the underlying assets, and that funds avoid paying distributions out of investor capital or the capital of new investors. Its surveillance found that every fund report it reviewed omitted information on the source of distributions paid, so that is a question the reporting does not currently answer on its own.
Principles 5, 6 and 8 are the ones the structural comparison between fund types turns on, because fee treatment, related party lending and valuation independence all vary by how the scheme is built rather than by how well it is run.
What are default rates in Australian private credit funds?
ASIC reported that the funds it surveyed disclosed low levels of default, "generally ranging from 0% to 6% of the loan book", and found in the same passage that those funds defined the word default differently from each other and described loan security inconsistently. Both halves have to travel together, because the second one is the finding and the first is only its setting.
A default rate is a ratio whose numerator is defined by the person publishing it. One fund may count a loan as in default at 30 days past due, another only once enforcement starts, another only after an impairment is booked, and a fourth may have extended the loan term instead and so have no default to report at all. Those four funds can hold identical loan books and publish very different numbers. That is why ASIC's concern is not that the reported rates are high or low, but that reporting may not give a true reflection of non-performing and distressed assets.
ASIC put evidence under that point in a footnote to the same finding, and it is the most instructive sentence in the report on this subject. One fund reported that 20 per cent of its loans were in default, but its definition was very wide and included minor breaches of covenants. Another fund reported that most of its loans were in default. Neither of those funds is necessarily in worse shape than a fund reporting nothing. They were counting a different thing.
| The measure | Who sets it | What it counts |
|---|---|---|
| The arrears disclosure | ASIC, through Disclosure Principle 3 | Loans in default or in arrears for more than 30 days, as a proportion of the loan book. The clock is fixed by the disclosure principle, which is what makes this line comparable in a way the default rate is not |
| The fund's own default rate | The responsible entity, in its own documents | Whatever the scheme's definition says. ASIC found one fund counting minor covenant breaches and reporting 20 per cent, and found funds describing loan security inconsistently as well |
| Loans amended, restructured or with interest capitalised | Neither, in most reporting | Loans whose term, covenants or other conditions have been amended or extended, or whose interest is added to the balance rather than paid in cash. Neither necessarily makes a loan a default under the fund's own definition, which is why both are read separately |
| The prudential definition, which does not reach the fund | APRA, for banks, building societies and credit unions | An exposure in default, meaning the lender considers the borrower unlikely to pay in full without recourse to actions such as realising security, and/or the exposure is 90 days or more past due. There is no equivalent binding definition for a mortgage scheme |
So a low reported default rate is not reassurance and a high one is not an alarm. Neither figure means anything until you know which of those 3 measures produced it, and the definition is a question you can ask.
There is a standard definition of non-performing in Australia, and it does not apply to your fund
Banks do not have this problem, because APRA sets the definition for them. Its Prudential Standard APS 220 defines a non-performing exposure as one in default, and default occurs when the lender considers the borrower unlikely to pay its obligations in full without recourse to actions such as realising available security, or the exposure is 90 days or more past due, or both. APRA's practice guide restates it the same way. An exposure returns to performing only once the borrower has nothing 90 days or more past due and has made repayments when due over a continuous period of at least 90 days.
One line in that regime is worth carrying into any conversation about a secured loan book. APRA states that collateralisation does not play a direct role in determining whether an exposure is non-performing. Security affects what a lender might eventually recover. It does not decide whether the loan is currently being paid, and under the prudential definition it does not stop the exposure being counted.
None of that binds a mortgage scheme. APS 220 is a prudential standard for authorised deposit-taking institutions, and a responsible entity is not one. That is the point rather than a caveat: a definition exists, it is public, it is precise, and the fund you are reading is under no obligation to use it. Nothing here is a comparison between a fund and a bank, and the two sets of figures are not comparable in either direction, for exactly the reason this section is about.
What to read instead of the headline rate
Three things in the disclosure carry more information than the rate itself. The first is the definition: whether the document says what default means for this scheme, and at what point a loan enters it. The second is the arrears line, because Disclosure Principle 3 requires the proportion of loans in default or in arrears for more than 30 days, and arrears is a harder number to define away than default. The third is amended, extended or restructured loans and capitalised interest. A borrower can receive changed terms, or have interest added to the balance rather than paid in cash, without the loan necessarily entering the fund's definition of default. ASIC's June 2026 statement expressly named loan amendments alongside defaults and impairments as signs of credit deterioration, so a low default rate should be read beside those other measures rather than on its own.
What happens to an investor when a loan does go bad depends on the scheme's own valuation and impairment machinery, which is where ASIC found the most problems, and on whether the scheme is still liquid enough to pay anyone who wants to leave.
Is anyone checking whether a private credit fund suits you?
For a retail private credit fund, yes in principle. The responsible entity must publish a target market determination describing the class of investor the product is designed for, and distributors must take reasonable steps so distribution is consistent with it. That is the design and distribution regime in Part 7.8A of the Corporations Act, explained in ASIC's Regulatory Guide 274.
Two limits on it are worth knowing before you rely on it. It applies to the responsible entity of a registered scheme, which is to say a retail fund, and not to the trustee of a wholesale fund. And an investment manager is caught only to the extent it is involved in distributing a retail fund to retail investors. So the further an offer sits from the retail perimeter, the less of this machinery is running behind it.
What ASIC found when it looked at how these funds are sold
Its surveillance describes 2 distribution routes. Direct to investor, using active multi-channel campaigns including direct email, websites, social media and printed material. Or indirect, relying predominantly on financial advisers and investment platforms. If an offer arrived in your inbox unsolicited, that is the first route working exactly as designed, and it is not evidence of anything one way or the other.
What ASIC found inside the target market determinations is more useful. Many retail funds described themselves as suitable for investors with a low risk tolerance, and stated that investors whose objective was capital preservation were within the target market. ASIC recorded a concern that the low-risk characterisation was not accurate for some of those funds. Some described the fund as suitable for a core allocation, inconsistently defined across the market as 25 to 75 per cent, or up to 50 per cent, or as a major allocation of up to 75 per cent of an investor's overall portfolio. ASIC's view is that those allocations may not be appropriate for some funds given their potentially higher-risk strategies.
On the better side, some funds built real conditions into distribution. Of the 20 retail funds, 2 specified that clients should receive personal advice, and 7 required unadvised retail investors to complete a questionnaire before investing. One banned mass communication channels as inappropriate for the product. That is the direct answer to being signed up in a few minutes on a platform: some funds do screen, several do not, and nothing obliged the one in front of you to.
ASIC also recorded poorer practice on the marketing side. It found 2 retail funds using strong and at times aggressive direct marketing, including mass communication and incentives such as bonuses for new investors or referral bonuses. One fund may have exaggerated the stability of its returns without fully disclosing the risks. In another case ASIC was concerned a fund was mislabelled and likely to mislead consumers into thinking it was a bank product. Where an offer reads like a deposit, the label is doing work the structure does not support, and the difference between a scheme and a deposit is the whole distinction.
What the regime does when it bites
During 2025 ASIC issued stop orders against 3 retail credit and mortgage funds, 2 of them under the design and distribution obligations. The concerns in 2 of those matters were that a fund's determination included no distribution conditions at all, or none that were appropriate. Both interim orders were revoked once the responsible entities amended the determinations, which is the mechanism working rather than failing. No fund is named here, and none needs to be: the point is that a published target market determination is a document ASIC will act on, which makes it worth reading rather than skipping.
What must a mortgage fund tell you before you invest?
A mortgage scheme offered to retail investors must give you a Product Disclosure Statement and must publish a target market determination describing the class of investor the product is designed for. Those two documents are the floor. For an unlisted mortgage scheme, ASIC layers a second set of expectations on top of them, and that second layer is the part almost nobody explains.
ASIC's Regulatory Guide 45, issued 5 March 2026, applies to unlisted registered mortgage schemes in which retail investors invest, directly or indirectly. It defines a mortgage scheme as a managed investment scheme with at least 50 per cent of its non-cash assets in mortgage loans or in unlisted mortgage schemes. Within that population, ASIC expects a responsible entity to disclose against 8 benchmarks on an if not, why not basis, and to address 8 disclosure principles alongside them.
Those are not the same instruction, and the difference decides how a report is read. The benchmarks produce a met or not met statement. The principles produce information. A responsible entity does not pass or fail a disclosure principle; it addresses it.
Three limits on whether RG 45 reaches your fund at all
Listed mortgage schemes are excluded from the benchmarks and the disclosure principles, on the basis that a listed scheme has a secondary market and a market supervisor. That matters more than it used to, because a growing share of private credit exposure is held through exchange-traded funds and listed investment trusts, and none of what follows applies to those. Two of the 8 benchmarks, liquidity and loan portfolio diversification, apply to pooled schemes only. And a fund that lends against property without meeting the 50 per cent test is outside RG 45 entirely.
The ongoing layer, which is the half that gets missed
Disclosure against the benchmarks is not a one-off document. ASIC expects it in the Product Disclosure Statement, within the first 15 pages and set out in a table, then updated in ongoing disclosure as material changes occur and refreshed at least half-yearly whether or not anything material has changed. Website disclosure is permitted in place of a fresh Product Disclosure Statement, on the condition that the benchmark disclosure sits in a single place on the site and is reached from a prominent link on the home page.
One expectation is tighter than the rest. For Benchmark 1, the cash flow estimates behind a pooled scheme's liquidity position are to be reviewed and updated at least every 3 months and approved by the directors at least every 3 months. Every other principle runs on the same clock: as material changes occur, and at least half-yearly.
That gives you a test to apply to any scheme already held. Not whether a disclosure exists, but whether it has moved since the day the units were bought. On the distribution side ASIC has been active in the same period: in 2025 it issued stop orders against 3 retail credit and mortgage funds, 2 of them under the design and distribution obligations. One of those orders was revoked later in the same year once the target market determination behind it had been amended, which is the mechanism working rather than failing.
What are ASIC's 8 RG 45 benchmarks for a mortgage scheme?
The 8 benchmarks cover liquidity, scheme borrowing, the loan portfolio, related party transactions, valuations, loan-to-valuation ratios, distribution practices and withdrawal arrangements. 8 disclosure principles sit alongside them, one to one, and carry the same names. The benchmarks are disclosed against on an if not, why not basis; the principles are addressed rather than passed or failed.
The table below reproduces ASIC's list and ASIC's ordering. It is the regulator's framework, not a scoring sheet, and reading it that way is the point: a scheme that reports against every benchmark has told you what it does, not whether what it does suits you.
| Benchmark | What it tests | The setting ASIC uses | What a disclosure looks like |
|---|---|---|---|
| 1. Liquidity | Pooled schemes only. Whether the responsible entity holds cash flow estimates covering the scheme's expenses, liabilities and cash flow needs. | Estimates cover the next 12 months, are updated at least every 3 months, and are approved by directors at least every 3 months. | A statement that the scheme meets the benchmark, or an explanation of how liquidity is managed another way. The estimates themselves are not required to be disclosed. |
| 2. Scheme borrowing | Whether the responsible entity has current borrowings, or intends to borrow, on behalf of the scheme. | The benchmark is met where the scheme does not borrow. | Where the scheme does borrow, the benchmark is not met and the explanation covers why, and how that borrowing is managed. |
| 3. Loan portfolio and diversification | Pooled schemes only. Whether the loan book is spread across loan size, borrower, class of borrower activity and geographic region. | No single asset and no single borrower above 5 per cent of scheme assets, and first mortgages over real property securing all loans. | A statement that each limb is met, or an explanation covering the limbs that are not. The limbs are separable and a scheme can miss one and meet the rest. |
| 4. Related party transactions | Whether the responsible entity lends to related parties of the responsible entity, or to the scheme's investment manager. | The benchmark is met where there is no related party lending. | Where related party lending occurs, the benchmark is not met and the explanation covers the controls applied to it. |
| 5. Valuation policy | Whether valuers are independent and appropriately qualified, whether they are rotated, and when a fresh valuation is required. | Independent valuations before a loan is issued and on renewal, and a fresh valuation within 2 months where directors form the view that a fall in security value may have caused a material breach of a loan covenant. | A statement of the valuation policy, or an explanation of how independence and currency are dealt with another way. |
| 6. Lending principles, loan-to-valuation ratios | The maximum proportion of a security's value the scheme will lend against, and how development drawdowns are released. | 70 per cent of the latest as if complete valuation for property development, and 80 per cent of the latest market valuation in all other cases, with staged drawdowns released against independent evidence of progress. | A statement that the maxima are observed, or the ratios the scheme actually applies and the reasoning behind them. |
| 7. Distribution practices | Whether the responsible entity will pay current distributions from scheme borrowings. | The benchmark is met where distributions are not funded from borrowings. | Where distributions are, or may be, funded from borrowings, the benchmark is not met and the disclosure says so. |
| 8. Withdrawal arrangements | How and when members can take their money out, split by whether the scheme is liquid. | For a liquid scheme, a maximum withdrawal payment period of 90 days or less in the constitution. For a non-liquid scheme, an intention to make withdrawal offers at least quarterly. | A statement of the withdrawal arrangements the scheme actually offers, and where they differ from the benchmark, the explanation for the difference. |
The figures in that table are ASIC's benchmark settings, not market averages and not a prediction about any particular scheme. A responsible entity is free to run different settings, provided it says so and explains itself, which is what the next section is about. How the ratios in Benchmark 6 are calculated is set out in the loan to value ratio entry, and structural comparisons between scheme types sit in the guide to how mortgage funds work in Australia.
What does "not met" mean in an RG 45 benchmark report?
Either the scheme meets a benchmark, or it does not and the responsible entity explains how it deals with the underlying issue another way. That is the whole of the device. ASIC's wording is that a responsible entity should give a clear statement that the scheme either meets the benchmark, or does not meet it, with an explanation of how and why it deals with the business factors or issues underlying the benchmark in another way, including the alternative systems and controls it has in place.
There is no partial pass, and that is the sentence most readers have never seen
The device is widely misread as a grading scale, where meeting most of a benchmark counts for something. ASIC closes that off directly: where a benchmark is not fully met, it is regarded as "not met (rather than partially met)". There is no middle setting. A report that reads as a near miss is, in the regulator's own terms, a benchmark that is not met with an explanation attached.
What a benchmark marked "not met" actually tells you
Not that the scheme is doing something wrong. ASIC built the alternative limb precisely because legitimate structures exist outside its settings, and a scheme that borrows, or lends to related parties, or funds distributions from borrowings, is not thereby in breach of anything. What the device does is force the alternative into writing, where it can be read and compared.
Which means the useful reading is not a count of how many benchmarks a scheme meets. It is the quality of the explanations attached to the ones it does not. A one-line explanation that restates the benchmark and says the responsible entity considers its approach appropriate has told you nothing. An explanation that names the alternative control, says who applies it and how often, and describes what happens when the control is breached has told you a great deal. Both satisfy the format.
Why does an RG 45 report show 5 benchmarks instead of 8?
Because some of the 8 do not apply to every scheme, and RG 45 allows a responsible entity to say so rather than report against a benchmark that cannot apply. A report showing fewer than 8 is common and is not, by itself, a gap in the disclosure. It is a description of the scheme's structure, and reading it that way tells you what kind of scheme you are being offered before you reach a single number.
This is the single most common point of confusion for someone holding a report for the first time, and it is not explained anywhere in the documents themselves. Three reasons account for almost all of it.
| Reason | Which benchmarks drop out | What it tells you about the scheme |
|---|---|---|
| The scheme is contributory, not pooled | Benchmarks 1 and 3, liquidity and loan portfolio diversification, which RG 45 applies to pooled schemes only | You are being offered an interest in particular mortgages rather than a share of a whole book, so diversification is your decision rather than the manager's, and liquidity is assessed loan by loan |
| Withdrawal is only available when the mortgage matures | Benchmark 8, withdrawal arrangements, which RG 45 provides may be treated as not applicable where the disclosure document states there is no withdrawal right until the loan matures | There is no exit mechanism at all before maturity, which is a more absolute position than a non-liquid pooled scheme, where a withdrawal offer is at least possible |
| Part of the guidance is switched off by the scheme's structure | The paragraphs of RG 45 dealing with contributory schemes and their per-mortgage disclosure, where the scheme is not contributory, and the reverse | The scheme is telling you which set of expectations it considers itself inside. That is a structural statement and it should match what the rest of the document says about how your money is allocated |
The question worth asking is not why there are 5 rather than 8. It is whether the report says which ones it has left out and why. A report that simply presents 5 benchmarks with no explanation of the missing 3 has skipped the step that makes the omission readable. The structural differences between pooled and per-loan participation are set out in the contributory mortgage funds guide.
What does the loan portfolio disclosure show, and what can it leave out?
It sets out the composition of the scheme's loans in detail, but a responsible entity is not required to publish everything, and ASIC has found that what is published is not always comparable between funds. Disclosure Principle 3 is the longest item in the guide and applies to pooled schemes.
What Disclosure Principle 3 requires
- Loans by number and value, split by class of borrower activity and by geographic region
- The proportion of loans in default or in arrears for more than 30 days
- The nature of the security, including whether mortgages rank first or second
- Loans approved but not yet advanced, and the maturity profile in increments of no more than 12 months
- Loan-to-valuation ratios and interest rates on loans, in percentage ranges
- Loans on which interest has been capitalised
- The proportion of total loan money lent to the largest borrower and to the 10 largest borrowers
- The percentage of loans by value secured by second-ranking mortgages, the use of derivatives, the non-mortgage assets, and the scheme's diversification policy
What RG 45 does not require
- The liquidity cash flow estimates themselves, which ASIC states are not required to be disclosed to investors
- The names of the largest borrowers, which ASIC accepts may not be appropriate to publish for reasons of privacy or commercial confidence
- For a contributory scheme, valuation information about mortgages other than the ones in which the investor has been offered an interest
Two limits on that second column are worth stating, because both cut the other way. The borrower carve-out covers naming only: the proportion of total loan money lent to the largest borrower, and to the 10 largest borrowers, is still a required disclosure. And the benchmarks and disclosure principles do not attempt to specify everything a Product Disclosure Statement must contain under the Corporations Act, so an item absent from a benchmark report is not thereby absent from the document.
The two lines in this list that do the most work
Capitalised interest and the maturity profile. A loan on which interest is being capitalised is not paying cash into the scheme, so income shown as accrued is not income received. And the maturity profile tells you when the scheme's loans are due to repay, which is the closest thing in the disclosure to a schedule of when the scheme expects to have money. Read against the withdrawal arrangements in Benchmark 8, those two lines say more about whether you can get out than the liquidity statement does.
Concentration is the third. The proportion lent to the largest borrower and to the 10 largest is a required disclosure precisely because a diversified-sounding book can rest on very few counterparties. ASIC's market work found that around half of Australian private credit is real-estate related, much of it construction and development, so a mortgage scheme's diversification by borrower can coexist with a single, undiversified exposure to one property cycle.
How are mortgage fund loans and property security valued?
The scheme's valuation policy sets who values the security and how often, and on a mortgage valuation the engagement runs between the lender and the valuer rather than the borrower. That single structural fact explains most of what an investor finds confusing about valuations inside a fund.
The professional guidance is explicit. The Australian Property Institute's guidance paper on valuations for mortgage and loan security purposes, effective 1 January 2025, states that instructions are ideally received from the lender and that "the terms of engagement are between the party relying on the valuation (the lender)" and the valuer. The valuation is produced for the party taking the risk. Where the fund is the lender, the fund is that party. Where the fund has acquired a loan someone else originated, the original valuation was produced for the originator, on the originator's instructions, at a date that is not today.
Benchmark 5 is ASIC's answer to that, covering valuer independence and professional membership, conflict procedures, valuer rotation and diversity, independent valuations before a loan is issued and on renewal, and a fresh valuation within 2 months where directors form the view that a fall in security value may have caused a material breach of a loan covenant. Benchmark 6 sets the ratio the valuation is then used for.
What ASIC found about who watches the value afterwards
Its surveillance was direct on the governance point: most funds reviewed did not have effective separation between the investment committee approving loans and the people responsible for monitoring loan performance and value afterwards, or for overseeing independent third-party valuation. And fewer than half had detailed written credit or impairment and default management policies at all.
Those two findings sit together for a reason. The people who approved a loan have an interest in it continuing to look like a good loan. Where the same people also supervise how it is valued afterwards, the number that reaches the unit price has passed through a conflict. And where no written impairment policy exists, there is no trigger that forces the question to be asked on a schedule rather than when someone chooses to ask it. ASIC's market review made the same point from the accounting side, observing that provisioning for expected losses does not appear to be widespread in the sector, which raises a question about how valuation methodologies are being applied.
The basis of the valuation, which is where the loan-to-valuation ratio goes wrong
A property can be valued as it stands today, or on the assumption that a planned development is finished. ASIC's surveillance found 5 wholesale funds valuing collateral for a number of loans on an as if complete basis rather than as is, across portfolios holding a mix of land, pre-construction and construction loans. The consequence is arithmetic. A ratio calculated against a completed value is lower than the same loan measured against the land as it sits, so a portfolio reported on that basis looks safer than one reported the other way, without a single loan being different.
ASIC treats a clear statement of the basis as better practice, and states that where the basis is not clearly disclosed the reported ratio may not provide useful information and could potentially be misleading. Its commissioned research made the same point about the construction period specifically, and set out good practice as quarterly independent valuations, or at least valuations reviewed by an independent third party, made for the benefit of the lender or security holder. The as is and on-completion distinction is explained in the loan to value ratio entry.
Frequency is the other half. ASIC found funds that valued assets only in response to a credit trigger such as default or a covenant breach, and one retail fund that valued the real estate collateral once every 42 months in ordinary circumstances. Where a valuation is 3 years old, the number in the unit price is a number about a market that has since moved.
From the origination side
Switchboard sits on the borrower side of these transactions. It arranges the loans that funds like these hold, which means it sees the file that produces the numbers an investor is later shown. Five observations, offered as broking-side observation rather than as rules, and deliberately without figures:
- A lender's file at settlement contains a great deal an investor never sees. The valuation instruction and its assumptions, the conditions attached to approval, the exceptions granted, and the correspondence about what the borrower's exit actually depends on. What reaches a fund report is a loan size, a security type and a ratio.
- A valuation instructed by the originator and one instructed by the fund can differ in scope, not only in number. Scope covers what the valuer was asked to assume, which basis was used, and what was excluded. Two valuations can both be correct and still not be comparable.
- Independent panel means the valuer is independent of the parties, not that the instruction is neutral. The instruction still comes from the lender and still frames the question.
- A first-ranking security answers who gets paid first, and nothing else. It does not decide whether there is enough there to pay anyone, how long realising it takes, or what the property is worth in the market that exists when it is sold rather than the one that existed when it was valued.
- Arrears look like something operationally long before they look like anything in a quarterly report. Late contact, a request to restructure, an interest payment funded from the loan rather than from the project. None of that is a default on anybody's definition until it is.
Broking-side observation about how loans are originated, as at August 2026. It is not a statement about any scheme, any fund, or any investment, and it is not financial product advice.
How do I check if a mortgage fund is legitimate in Australia?
Through public registers, and the checks are free. Whoever is offering you the investment, the scheme itself, the entity that operates it and the dispute resolution scheme it belongs to are all recorded on registers you can search yourself, and none of that depends on anything the fund tells you.
This matters because a great deal of private credit reaches investors through an introduction rather than through a search. Somebody sends a document. The document is professionally produced and the numbers in it are attractive. Nothing in the document can verify the document, and a certificate or licence number reproduced on a page proves only that the page contains a number.
| What you are checking | Where it is recorded | What a result does and does not prove |
|---|---|---|
| The scheme exists and is registered | The ASIC Professional Registers Search, which carries registered managed investment schemes alongside licensees | Proves the scheme is registered and gives its ARSN. It says nothing about performance, and an unregistered arrangement offered to retail investors is itself the finding |
| The operator is licensed | The same ASIC Professional Registers Search, which carries Australian financial services licensees and their authorised representatives | Proves a licence exists and shows its authorisations. ASIC states that granting a licence is a point-in-time assessment and does not "guarantee the probity or quality of the licensee's services" |
| The website itself belongs to the licensee | Where ASIC has collected it, the website address published against the AFS licensee in the Professional Registers Search | Helps distinguish a genuine licensee website from an imposter copying a real name or licence number. ASIC began publishing licensee website addresses in 2026 specifically to strengthen this check. |
| The person contacting you is authorised | The authorised representative record in the ASIC Professional Registers Search | Shows whether the individual or firm is authorised by the licensee they name. A person representing a licensee they are not recorded against is the answer to the question |
| The company behind the name is real | The free Australian Business Register lookup, alongside ASIC's own company and organisation registers | Confirms the entity exists, its ABN and ACN, its registration date and its registered office. A trading name on a document is not an entity, and a company registered last month is a different proposition from one registered in 2009 |
| The firm belongs to the complaints scheme | The AFCA Financial Firm Search | Confirms current AFCA membership and complaint contact details. Membership is necessary for AFCA to accept a complaint against that firm, but it does not mean every complaint is within AFCA's jurisdiction. |
| The offer is not already flagged | ASIC investment scam alerts and the Investor Alert List, plus ASIC media releases and stop-order records | Shows entities ASIC has publicly raised concerns about. Absence from the list is not clearance, it only means nothing has been published |
| The disclosure is current | The scheme's own benchmark disclosure, which ASIC expects in the Product Disclosure Statement and then refreshed at least half-yearly | Shows whether the scheme has updated its position since you were given the document. A benchmark report dated more than half a year ago is behind ASIC's own expectation |
If you arrived here because of a news story, a social post or a redemption notice, search the exact legal entity and the exact scheme name, not only the brand on the cover. Useful follow-on searches are the scheme name plus "ASIC", "stop order", "PDS", "target market determination", "redemption" and "withdrawal". A headline tells you an event occurred; the regulator record and the current scheme documents tell you which legal entity, product and investor rights are actually involved.
Two habits are worth more than the individual checks. Search the register for the entity name yourself rather than following a link supplied in the offer document, and check the exact legal entity you would be paying, which is often not the entity whose brand appears on the cover. What becoming the lender directly involves instead, and how that changes the checks, is covered in the guide to becoming a private lender.
A research house rating is not independent verification
Many retail private credit funds rely on ratings from external research houses to support their marketing, and ASIC engaged with those research houses as part of its surveillance. What it found is worth knowing before a rating is read as assurance. Private credit researchers rely heavily on fund operators and investment managers to supply the data and information, and have limited capacity for independent verification. Their assessments tend to prioritise governance structures and investment strategy over direct credit risk analysis. And the researchers ASIC spoke to themselves raised a lack of standardisation in valuation and provisioning practices across the Australian market.
None of that makes a rating worthless, and ASIC records that research houses are well placed to drive improvement across governance, valuation, risk management and disclosure standards precisely because a rating carries so much weight in distribution. It does mean a rating is an opinion formed largely on information the manager provided, and it is not the same kind of fact as a register entry.
What can you do if a fund has already frozen or delayed your money?
If a mortgage fund freezes withdrawals, first identify exactly which withdrawal rule has changed and which document gives the responsible entity that power. A freeze is a liquidity position rather than proof of a loss: ASIC describes freezing a scheme as often a prudent measure to protect all members and states that it does not necessarily mean asset values have fallen, money has been lost or distributions have stopped.
That framing is the opposite of the one most people arrive with, and it is the regulator's, not the industry's. It does not mean a frozen fund is safe. It means the freeze itself is evidence about liquidity, not about value, and the two questions have to be asked separately.
The hardship route
ASIC's information sheet on frozen funds and hardship withdrawals sets out a path for members in financial difficulty. A responsible entity that intends to allow hardship withdrawals must notify ASIC, and the funds that have done so are listed in the appendices to ASIC's companion sheet for responsible entities. A member requests the withdrawal from the responsible entity and has to demonstrate one of 4 grounds: urgent financial hardship where reasonable and immediate living expenses cannot be met, unemployment for at least 3 months with no other means of support except government assistance, compassionate grounds, or permanent incapacity. Compassionate grounds cover 6 defined situations, including medical costs for a life-threatening illness, modifications to a home or vehicle for a severe disability, funeral expenses, care for a person with a terminal illness, preventing a lender selling a principal residence, and meeting certain binding financial obligations.
Where the criteria are met, and subject to the discretion of the responsible entity, ASIC's settings allow a member to withdraw up to a total of $100,000 per calendar year across up to 4 hardship withdrawals in that year. Two limits matter as much as the numbers. The responsible entity decides who meets the criteria and how much each member can withdraw, and it is not obliged either to offer hardship withdrawals at all or to grant a request that is made. ASIC does not determine hardship, does not issue the withdrawals, and does not give legal advice.
The vocabulary, because the documents and the news use different words
The label in the email is not the legal answer. "Delayed", "capped", "pro rated", "queued", "gated" and "frozen" describe different mechanisms, so identify the exact term, its effective date and the clause in the constitution, PDS or offer document that controls it.
| Word used | What it usually means | What to check next |
|---|---|---|
| Delayed | Payment or processing is taking longer than the ordinary timetable. It may or may not involve a formal restriction on withdrawal rights. | The notice, the normal payment period and whether the responsible entity has invoked a specific discretion or suspension clause. |
| Capped | The fund limits the total amount available for withdrawals in a period. | The size and frequency of the cap, whether requests carry forward, and how the available amount is allocated. |
| Pro rated | Eligible requests exceed the amount available, so investors receive a proportion of the amount they requested. | The total withdrawal pool, the pro-rata method and whether the unpaid balance stays on foot for the next period. |
| Queued | A request remains pending for a later processing window rather than being paid immediately. | Queue priority, cancellation rights, the next processing date and whether a new request is required. |
| Gated | A market term commonly used where redemptions are restricted under a fund rule, cap or manager discretion. | The actual contractual mechanism. "Gate" is a label; the constitution, PDS or offer document determines the right. |
| Frozen or suspended | For a registered scheme, the responsible entity has suspended members' rights to redeem or withdraw. | The responsible entity's notice, whether hardship withdrawals are offered, whether the scheme is liquid or illiquid, and the internal complaints process. |
Two of ASIC's findings are worth carrying into any conversation with a manager in this position. It found one wholesale fund that continued to directly distribute its product while a substantial proportion of its loans were in default and investor redemptions were frozen. And it found a fund using side letters that gave some investors better redemption terms and distribution rates than others who had invested on the terms of the information memorandum. Neither is the norm and neither is unheard of.
Members' rights, which almost nobody uses
Where members believe a scheme is no longer performing as intended, or are dissatisfied with how the responsible entity is operating it, 2 routes sit outside the withdrawal question entirely. Members collectively can request a members' meeting to consider resolutions about the scheme and its management, and the resolutions available include amending the constitution, removing and replacing the responsible entity, and winding up the scheme. Individually, a member has standing to apply to a court for orders about the operation of the scheme, including injunctions, winding-up orders and the appointment of a temporary responsible entity.
Can AFCA force a frozen fund to reopen withdrawals?
Not simply because the fund has frozen everyone's withdrawals. AFCA states that it generally cannot consider a complaint about the management of a fund or scheme as a whole. It can, however, consider some individual investment complaints against an AFCA member firm, including complaints about misleading or insufficient disclosure and, where the facts support it, a failure to follow a redemption instruction that could have been carried out. The distinction is between challenging the fund-wide management decision and complaining about conduct affecting you individually.
| Event | What it means | What document answers the next question |
|---|---|---|
| ASIC design and distribution stop order | ASIC restricts specified distribution conduct to retail clients, such as dealing in interests, giving a Product Disclosure Statement or providing general financial product advice recommending the product. It is an action about how the product is being distributed, not a statement that existing investors have lost money. | Read the ASIC order and the fund's current target market determination. The design and distribution framework is explained in RG 274. |
| Withdrawal freeze, gate, cap or queue | The responsible entity suspends, limits, pro rates or delays members' ability to redeem. This is a liquidity mechanism and does not by itself state what the underlying assets are worth. | Read the notice sent to members, the constitution, the withdrawal terms in the Product Disclosure Statement and any current website disclosure. |
| Underlying borrower default or distress | A borrower has breached its loan terms or is showing signs of repayment stress. Funds define default differently, so this event can appear in reporting as arrears, impairment, a loan amendment or capitalised interest before it appears in a headline default rate. | Read the fund's default definition, the arrears disclosure, impairment policy, capitalised-interest line and maturity profile. |
| Fund or operator failure | This is a separate insolvency or wind-up question. It is not the same event as a borrower default, an ASIC distribution stop order or a temporary withdrawal freeze. | Read the wind-up or insolvency notices and the compensation and recovery section below. |
Complaints, and the free path
Complain to the responsible entity first, through its internal dispute resolution process, which ASIC's rules require it to respond to no later than 30 calendar days after receiving a standard complaint. If the issue remains unresolved, check the firm in AFCA's Financial Firm Search and whether the complaint is one AFCA can consider under its Rules. AFCA is free and independent, but membership is only the first jurisdictional question and AFCA generally cannot consider the management of a fund or scheme as a whole. Its contact number is 1800 931 678.
The mechanics of withdrawal before a scheme freezes, including when a registered scheme is liquid and how a withdrawal offer works, are set out in the guide to mortgage funds. One correction is worth carrying across from it, because it circulates widely in the wrong direction. A registered scheme is liquid where liquid assets are at least 80 per cent of the value of scheme property, so it becomes non-liquid as soon as they fall below that line. The version in general circulation has the test inverted and would only bite once four fifths of the scheme had become unsellable, which is far too late.
Is there any compensation if a private credit fund fails?
There is no scheme that compensates you because a fund failed. The 2 Australian schemes people have in mind are the Financial Claims Scheme and the Compensation Scheme of Last Resort, and neither is triggered by a managed investment scheme losing money. This is the single most misunderstood point on the investor side of private credit, and it is worth being exact about, because the exception in the second one is real and narrow.
| Protection | What it covers | Does it reach a fund interest? |
|---|---|---|
| Financial Claims Scheme | Deposits up to $250,000 per account holder per APRA-licensed bank, building society or credit union incorporated in Australia. | No. APRA states it does not apply to finance companies and other financial institutions that are not licensed by APRA. A scheme interest is not a deposit and a responsible entity is not an authorised deposit-taking institution. |
| Compensation Scheme of Last Resort | Up to $150,000 for an unpaid AFCA determination in 4 sub-sectors: personal financial advice, credit intermediation, securities dealing other than issuing securities, and credit provision. It began operating on 2 April 2024. | Not for the fund itself. Operating a managed investment scheme is not one of the 4 sub-sectors, so a responsible entity's failure does not by itself open a claim. |
| The advice pathway into that scheme | A complaint against a financial advice firm, determined by AFCA, where the determination goes unpaid. | Sometimes. AFCA has published an approach to determining compensation in complaints against financial advice firms where the responsible entity of a managed investment scheme has become insolvent. |
| Recovery from the scheme's own assets | Whatever the scheme still holds. ASIC's own description of the structure records that fund assets are held by the custodian, separately from the operator. | Yes in principle, and it is not compensation. It is a recovery through a wind-up, in an amount and on a timetable nobody can state in advance. |
Why the advice pathway is the one that decides it
Read the second and third rows together and the practical rule falls out. Whether anything is available generally turns on whether a financial advice firm was involved and whether AFCA has determined against that firm, rather than on whether the fund failed. Two people can lose the same amount in the same fund and be in completely different positions: one was advised into it and one clicked through a platform.
That is not a reason to seek out an adviser in order to manufacture a claim, and it is not advice about how to invest. It is the shape of the safety net, and knowing the shape is the reason to look hard at the disclosure while you still have the choice, rather than after. What a complaint to AFCA can and cannot reach is set out in the section on a fund that has already frozen your money.
What the responsible entity owes you in the meantime
For a registered scheme, Chapter 5C of the Corporations Act imposes statutory duties on the responsible entity. ASIC summarises them as acting in the best interests of fund members, prioritising members where there is a conflict of interest, exercising the requisite degree of care and diligence, valuing scheme property at regular intervals, managing related party transactions, and having liquidity provisions in place.
Those duties are a reason the retail and wholesale line matters more than it looks. ASIC's own table records that the Chapter 5C duties, the design and distribution obligations, and the Product Disclosure Statement and periodic statement requirements apply to the responsible entity of a registered retail fund and do not apply to the licensed trustee of an unregistered wholesale fund. What survives on both sides is the general licensee obligation to act efficiently, honestly and fairly, the requirement for adequate conflict arrangements and risk management systems, and the prohibitions on misleading or deceptive conduct. Where those classification tests come from is a separate subject.
What is a feeder fund, and why did Australian investors feel offshore gating?
A feeder fund invests into another scheme rather than lending directly, so the investor's liquidity depends on the liquidity of a fund they did not choose and may never have read about. ASIC's consumer guidance names feeder funds as a scheme type alongside pooled and contributory structures, and it is the type most likely to surprise its own investors.
The reason it matters in 2026 is that ASIC has said so. In its June 2026 statement on private credit it recorded that recent isolated incidents show Australian retail investors can be exposed to offshore redemption constraints through local feeder funds, and that while redemption requests remain contained in aggregate, activity has been higher in feeder funds investing into global managers. In other words, an Australian investor in an Australian-domiciled fund can find their exit governed by a decision taken by a manager in another jurisdiction under another regime.
What that means for reading a disclosure
Two questions follow, and neither is answered by the benchmark table. The first is whether the scheme lends or invests: a scheme that mostly holds interests in other schemes is not lending, and its loan portfolio disclosure describes someone else's book. The second is where the underlying scheme sits and what its own redemption terms are, because those terms, not the Australian document, decide when money comes back.
RG 45's definition captures this. A mortgage scheme is one with at least 50 per cent of its non-cash assets in mortgage loans or in unlisted mortgage schemes, so a fund of funds can be inside RG 45 while holding almost no loans of its own. The benchmarks then describe a portfolio that the responsible entity does not originate, does not value and does not enforce.
What changes if you are classified as a wholesale client?
Classification as a wholesale client changes what a fund must give you and what dispute resolution you can reach, and the tests that decide it are set by the Corporations Act and the Corporations Regulations rather than by preference. This page does not state those tests or their thresholds. They are the subject of a separate guide to the wholesale investor certificate, along with what a qualified accountant's certificate does and how long it lasts. What matters here is narrower: what the classification takes away.
| What it affects | Retail client | Wholesale client |
|---|---|---|
| Product Disclosure Statement | An entitlement. Where retail investors invest in a registered scheme, the scheme issues one, and for an unlisted mortgage scheme ASIC expects the benchmark disclosure inside it | Not an entitlement. What you receive is whatever the offer document contains, commonly an information memorandum rather than a regulated disclosure document |
| RG 45 benchmark reporting | ASIC's expectations attach to unlisted mortgage schemes in which retail investors invest | Outside that population. ASIC's surveillance covered wholesale funds, but the RG 45 disclosure expectations are framed around retail investment |
| Target market determination | Published for the product, describing the class of investor it is designed for | The design and distribution regime is directed at retail distribution, so the document is not the reference point it is on the retail side |
| Statutory duties of the operator | The Chapter 5C duties apply: act in the best interests of members, prioritise members where interests conflict, exercise care and diligence, value scheme property at regular intervals, manage related party transactions and have liquidity provisions in place | Those duties do not apply to the trustee of an unregistered wholesale fund. What survives is the general licensee obligation to act efficiently, honestly and fairly, adequate conflicts and risk management arrangements, and the prohibitions on misleading or deceptive conduct |
| Internal dispute resolution | ASIC's rules require a response to a standard complaint no later than 30 calendar days after it is received | The obligations in ASIC's dispute resolution guidance are framed around retail clients and consumers |
| External dispute resolution | AFCA membership is the ordinary position for firms providing relevant services to retail clients, but AFCA still checks whether the particular complaint falls within its Rules | Membership is necessary for a complaint against that firm, but AFCA still applies its eligibility, jurisdiction and exclusion rules, so wholesale status can matter. ASIC notes that lenders providing only commercial loans need neither a credit licence nor AFCA membership. |
| Where the test is set | The Corporations Act and the Corporations Regulations. Not a matter of election, and not conferred by a fund | The same provisions. Certification has a defined life, covered in the wholesale client and sophisticated investor entries |
What should a wholesale investor ask for if there is no RG 45 report?
If you are a wholesale investor and no RG 45 report is required, ask the manager to provide the equivalent risk data voluntarily. The useful comparison is not "PDS versus information memorandum"; it is whether you can obtain the same underlying facts about arrears, valuations, concentration, conflicts, fees and liquidity before your money moves.
- Default and arrears: the fund's definition of default, the proportion more than 30 days in arrears, and how restructures or covenant breaches are treated.
- Capitalised interest and amendments: how much interest is being added to loan balances rather than received in cash, and how many loans have had terms or maturities extended.
- Concentration: exposure to the largest borrower, the 10 largest borrowers, related groups, sectors and geographic regions.
- Valuations: valuation dates, whether values are as is or as if complete, who instructs valuers, how independence is managed and when fresh valuations are triggered.
- Total manager remuneration: management fees plus borrower-paid fees, retained interest margins, default income and income earned through interposed vehicles.
- Related parties and conflicts: related-party lending, common ownership, side letters and the controls used where the manager or an associate sits on both sides of a transaction.
- Liquidity and exit: lock-ups, caps, gates, queues, suspension rights, withdrawal history and, for a feeder fund, the redemption rules of the underlying fund.
A wholesale manager is not obliged by RG 45 to give you those answers merely because you ask. Whether the answers exist in writing, how current they are and whether the manager will provide them are part of the information available to you before deciding what to do next.
The membership point runs the other way from how the classification is usually sold. Being a wholesale investor or a professional investor is not a tier of access with better terms attached. It is a statement by the law that you are presumed able to look after yourself, and the documents and pathways built for people who are not presumed that are removed accordingly.
ASIC has also noted the direction of travel on the retail side. In its key issues outlook published in January 2026 it recorded that retail access to private credit and other private market products is expanding, with "investment thresholds as low as ~$2,000", and that platforms are enabling participation in products it describes as inherently less transparent and, in some cases, more complex.
Is it a fund interest or a direct loan, and why does the legal regime differ?
One is a financial product and the other is credit. An interest in a mortgage scheme sits under the financial services regime; lending directly on a mortgage is a credit facility governed by credit law, and the two carry different disclosure and different dispute rights. Two arrangements that both end with money secured against the same property can sit under different statutes, and which one applies is decided by what you hold, not by what the return looks like.
What you hold when you hold a fund interest
Units or an interest in a scheme, while the scheme holds the mortgages. The responsible entity is the lender of record, sets the valuation policy, decides the impairment treatment and makes any withdrawal offer. The disclosure document is a Product Disclosure Statement because the thing being offered is a financial product, which is precisely why RG 45's benchmark reporting attaches to it. Your exposure is to the scheme's whole loan book and to the manager's competence in running it, not to a single borrower.
ASIC's investor guidance draws a further distinction inside that category. In a pooled scheme, all investors share in all of the scheme's mortgages and share the income and the risks. In a contributory scheme, particular mortgages are matched to particular investors, those mortgages may pay different income from others in the scheme, and withdrawal is usually only possible when the chosen mortgage matures. Feeder funds invest into other schemes. Per-loan disclosure in the contributory structure is covered in the contributory mortgage funds guide.
What you hold when you lend directly
You are the mortgagee. The security is yours, the borrower is your counterparty, and the arrangement is credit rather than a financial product, which moves it into a different statute with a different perimeter. ASIC states that perimeter plainly in its credit legislation guidance: the credit legislation reaches credit provided to a natural person or a strata corporation for personal, domestic or household purposes, or wholly or predominantly to purchase, renovate or improve residential property for investment purposes, and "Loans to companies are not subject to the credit legislation." Most commercial property lending is therefore outside it entirely. What that means for the borrower, ASIC is direct about: "The law provides the lowest level of protection to commercial loans", including loans to small businesses. Direct-deal mechanics are covered in the private mortgage investing guide.
That boundary is also where the regulator has been active. In October 2024 ASIC commenced proceedings alleging that a lending model required a company to be the named borrower where the company did not benefit from, or have any genuine interest in, the loan, in order to avoid the National Credit Code; the allegations cover up to 47 loans totalling over $37 million between 7 March 2019 and 4 October 2023. Those allegations have not been determined. Both respondent companies were placed into liquidation on 22 May 2026, ASIC was granted leave to continue on 30 July 2026, and the matter is listed for hearing on 8 February 2027. No court has made any finding, and nothing about the matter is stated here as fact.
Two boundaries worth stating explicitly, because this page sits next to pages written for the other side of the transaction. What happens to a borrower once enforcement starts is a different subject with a different audience, and it is covered in the guide to refinancing when a mortgagee is in possession. And Switchboard's own work sits on the borrower side of the line: it arranges private lending for borrowers and holds a credit licence authorisation, not a financial services licence, which is why this page is factual information about a class of financial product and nothing more.
What questions should I ask a private credit fund before investing?
The most useful questions are the ones ASIC's own surveillance measured, because each one corresponds to something the regulator found was inconsistently disclosed across the 28 funds it reviewed, and each maps onto one of the 10 principles ASIC published alongside those findings. These are not a checklist issued or endorsed by anyone, and they do not assess any scheme. They are a restatement, in question form, of what ASIC looked for.
- How does this scheme define default, and at what point does a loan enter it? ASIC found funds defined the term differently and described loan security inconsistently, which is what makes default rates non-comparable.
- What total remuneration does the manager receive in connection with this fund, including fees paid by borrowers? ASIC found borrower-paid fees are often excluded from fee disclosure, so a headline management fee can understate what the manager earns.
- What interest rates or ranges are charged to the underlying borrowers? Only 4 of the 28 funds ASIC reviewed published this.
- Who values the security, who instructs them, and how often are valuers rotated? Benchmark 5 covers valuer independence, rotation and diversity.
- Who monitors loan performance and value after the loan is approved, and are they the same people who approved it? Most funds reviewed had no effective separation between the two functions.
- Is there a written credit, impairment and default management policy, and when was it last reviewed? Fewer than half the funds reviewed had one.
- What proportion of the loan book is lent to the largest borrower and to the 10 largest borrowers? This is a required disclosure under Disclosure Principle 3, even though the names are not.
- Does the scheme lend to related parties of the responsible entity or the investment manager, and what controls apply? Benchmark 4, and the explanation matters more than the result.
- Are distributions ever funded from scheme borrowings? Benchmark 7 asks exactly this.
- On what loans is interest being capitalised rather than paid in cash? Disclosure Principle 3 requires it, and it separates income accrued from income received.
- What is the maturity profile of the loan book, and how does it line up with the withdrawal arrangements? Both are required disclosures and they are more informative read together than apart.
- When was the benchmark disclosure last updated, and where is the current version published? ASIC expects it refreshed at least half-yearly and, where it sits on a website, in a single place reached from a prominent home page link.
None of these questions has a right answer. They have answers that are documented and answers that are not, and the difference between those two is most of what an investor can establish without a licence to assess the investment itself.
What the disclosure regime does and does not do. ASIC sets what an unlisted mortgage scheme must tell a retail investor: 8 benchmarks reported on an if not, why not basis, 8 disclosure principles addressed alongside them, refreshed at least half-yearly. It does not set what you will be paid, it does not rate any fund, and its own surveillance found that the numbers being published are frequently not comparable between funds. A report showing fewer than 8 benchmarks is usually a description of the scheme's structure rather than a gap, and a benchmark marked not met is an explanation to be read, not a failure to be counted.
Read the explanations, not the score. Then check the scheme, the licensee and the complaints-scheme membership on the public registers yourself, before the money moves.
Frequently Asked Questions
ASIC names 6: opacity, conflicts of interest, valuation uncertainty, illiquidity, leverage, and the credit risk that borrowers fail to repay. Its consumer guidance states that you can still lose money even where assets secure the loans. 5 of those 6 are about the manager rather than the borrowers, which is why the disclosure documents matter as much as the loan book. The regulator's own surveillance found fewer than half the funds it reviewed had detailed written credit, impairment or default management policies. Category-level orientation sits in the private credit funds guide.
ASIC published 10 principles in November 2025 for private credit done well: stewards of other people's money, organisational capability, transparency, design and distribution, fees and costs, conflicts of interest, governance, valuations, liquidity, and credit risk. ASIC states that individual fund operations should be benchmarked against them, and in June 2026 said it expects boards, trustees and chief investment officers to assess current practices against them and lift standards where needed. They are the regulator's benchmark for operators, not a rating tool. The full set is in the principles section above.
ASIC's commissioned research set out a 9-item working template: returns over 4 periods before and after fees; the number of loans; loans over 5 per cent of portfolio value; geographic spread; loans in arrears and the time in arrears; loans using payment in kind and their share by value; the split of distributions between cash income and other sources; and fund gearing. ASIC then reported that no fund in its review disclosed all of it, and that every report omitted the source of distributions.
ASIC reported that the 28 funds it surveyed disclosed defaults generally in a range of 0 to 6 per cent of the loan book, and found in the same passage that those funds defined default differently and described loan security inconsistently. The qualifier is the finding. A default rate is a ratio whose numerator is set by whoever publishes it, so two funds with identical books can publish very different numbers. The arrears line and the capitalised interest disclosure in the loan portfolio principle are harder to define away.
APRA's Prudential Standard APS 220 defines a non-performing exposure as one in default, meaning the lender considers the borrower unlikely to pay in full without recourse to actions such as realising security, or the exposure is 90 days or more past due, or both. APRA also states that collateralisation does not play a direct role in that classification. None of it binds a mortgage scheme, because a responsible entity is not an authorised deposit-taking institution. A precise public definition exists and your fund is not required to use it, which is why default rates between funds are not comparable.
Across the 28 funds ASIC reviewed, borrower interest rates ran from 2.50 to 33.51 per cent in retail funds and 8.00 to 41.66 per cent in wholesale funds, with the highest attributed to unsecured lending and penalty rates on loans already in default. Only 4 of the 28 published any of it. The rate a lender charges is its own assessment of how risky the loan is, so a fund that will not disclose it has withheld its own risk pricing. Fee structures across fund types are compared in the mortgage funds guide.
Because some of the 8 do not apply to every scheme. Benchmarks 1 and 3, liquidity and loan portfolio diversification, apply to pooled schemes only, so a contributory scheme reports on 6. RG 45 also provides that withdrawal arrangements may be treated as not applicable where the disclosure document states there is no withdrawal right until the mortgage matures. Fewer than 8 is usually a description of the structure rather than a gap, but the report should say which ones it left out and why. Structure differences sit in the contributory mortgage funds guide.
It means the benchmark is not fully met and the responsible entity has explained how it deals with the underlying issue another way. ASIC states there is no partial pass: a benchmark not fully met is regarded as not met rather than partially met. It is not a breach, because ASIC built the alternative limb for legitimate structures that sit outside its settings. The useful reading is the quality of the explanation, not the count of benchmarks met. How a scheme's structure decides which benchmarks apply is set out in the mortgage funds guide.
Through public registers, free, and without relying on anything the fund tells you. ASIC's professional registers carry registered managed investment schemes, Australian financial services licensees and their authorised representatives. AFCA publishes its own member search, which is the reliable way to confirm complaints-scheme membership rather than a certificate produced by the firm. ASIC also maintains an investor alert list. One caution from ASIC itself: granting a licence is a point-in-time assessment and does not guarantee the probity or quality of the licensee's services. Search the register for the entity name yourself.
Not in the way most people assume. ASIC engaged with research houses during its surveillance and found that private credit researchers rely heavily on fund operators and investment managers for data and have limited capacity for independent verification, and that their assessments tend to prioritise governance structures and investment strategy over direct credit risk analysis. The researchers themselves raised a lack of standardisation in valuation and provisioning across the market. A rating is an opinion formed largely on information the manager supplied. The public register checks are a different kind of fact.
For a retail fund, yes in principle. The responsible entity must publish a target market determination and everyone distributing the product must take reasonable steps so distribution matches it. That regime does not apply to the trustee of a wholesale fund. ASIC found that of 20 retail funds, 2 required personal advice and 7 required unadvised investors to complete a questionnaire before investing, so screening varies widely. It also questioned whether some funds describing themselves as low risk were accurate. Classification tests sit in the wholesale investor certificate guide.
Ask the responsible entity what applies to your scheme, because a freeze is a liquidity position rather than proof of a loss. ASIC describes freezing as often a prudent measure protecting all members that does not necessarily mean value has fallen or money has been lost. Routes include a hardship withdrawal where one is offered, members' rights to call a meeting or apply to a court, and a complaint through internal dispute resolution and then AFCA, which generally cannot consider the management of the scheme as a whole. Withdrawal mechanics before a freeze sit in the mortgage funds guide.
No. An ASIC design and distribution stop order restricts specified distribution conduct to retail clients, such as dealing in interests, giving a Product Disclosure Statement or providing general financial product advice recommending the product. A withdrawal freeze is different: it is the responsible entity suspending or limiting existing members' redemption rights. Read the ASIC order and the fund's withdrawal notice separately; the distinction is set out in the frozen-funds section above.
Possibly, where the responsible entity has chosen to offer hardship withdrawals and has notified ASIC. You must demonstrate one of 4 grounds: urgent financial hardship, unemployment for at least 3 months with no other means except government assistance, compassionate grounds, or permanent incapacity. Where the criteria are met, ASIC's settings allow up to $100,000 per calendar year across up to 4 withdrawals, subject to the responsible entity's discretion. It is not obliged to offer them or to grant a request. The scheme and its operator are covered in the managed investment scheme entry.
The responsible entity first, through its internal dispute resolution process. ASIC's rules require a response to a standard complaint no later than 30 calendar days after it is received. If the issue remains unresolved, check whether the firm is an AFCA member and whether AFCA can consider your individual complaint. AFCA can consider misleading or insufficient disclosure and some failures to follow redemption instructions, but generally not the management of a fund or scheme as a whole. It is free, on 1800 931 678. Classification is covered in the wholesale investor certificate guide.
No. The Financial Claims Scheme protects deposits up to $250,000 per account holder per APRA-licensed bank, building society or credit union, and APRA states it does not apply to financial institutions that are not licensed by APRA. A mortgage scheme is not an authorised deposit-taking institution and your money in it is not a deposit. ASIC makes the same point from the other direction, describing mortgage investment products as riskier than bank term deposits because the issuer may not be well capitalised, covered by the scheme or supervised by APRA. Structures are compared in the mortgage funds guide.
No, and ASIC has said so in terms. A term deposit with an APRA-supervised institution sits behind prudential regulation and the Financial Claims Scheme. A mortgage scheme interest sits behind neither, and its value depends on loans repaying. ASIC's investor guide calls unlisted mortgage schemes riskier than term deposits from prudentially regulated banks, building societies and credit unions, and cautions that even where a scheme says you can withdraw at short notice it might take as long as 12 months. What must be disclosed instead is in the private credit funds guide.
A non-performing loan can reduce the value of the scheme's assets and can affect distributions and the ability to withdraw. How visible that is depends on the scheme's valuation and impairment policies, which is where ASIC found problems: most funds reviewed had no effective separation between the committee approving loans and the people monitoring them afterwards, and ASIC recorded a concern that reporting may not reflect non-performing and distressed assets. Whether the security recovers the loss is separate from whether it ranks first, as the loan to value ratio entry explains.
Not for the fund failing on its own. The Financial Claims Scheme covers deposits with APRA-licensed institutions and a scheme interest is not a deposit. The Compensation Scheme of Last Resort pays up to $150,000 on an unpaid AFCA determination in 4 sub-sectors: personal financial advice, credit intermediation, securities dealing other than issuing, and credit provision. Operating a managed investment scheme is not one of them. AFCA has published an approach for complaints against financial advice firms where a responsible entity has become insolvent, so an advice pathway can exist. See the compensation section.
In the Product Disclosure Statement first, where ASIC expects it within the first 15 pages and set out in a table, and then in ongoing disclosure. A responsible entity may publish the ongoing version on the scheme's website instead of issuing a fresh PDS, provided it sits in a single place reached from a prominent home page link. It should be refreshed as material changes occur and at least half-yearly. A report older than that is behind ASIC's expectation. Structures are compared in the mortgage funds guide.
No. A Product Disclosure Statement is an entitlement of retail clients. Where you are classified as a wholesale client, the regime that produces a PDS and a target market determination does not apply in the same way, and what you receive instead is whatever the offer document happens to contain, commonly an information memorandum. The tests that decide the classification are prescribed by the Corporations Regulations rather than being a matter of choice. The practical point is that the classification is not a status upgrade. It removes documents you would otherwise be entitled to.
A fund that invests into another scheme rather than lending directly, so your liquidity depends on a fund you did not choose. ASIC's consumer guidance names feeder funds alongside pooled and contributory structures. In June 2026 ASIC recorded that Australian retail investors can be exposed to offshore redemption constraints through local feeder funds, and that redemption activity has been higher in feeder funds investing into global managers. RG 45 can still apply, because its definition counts interests in other unlisted mortgage schemes. How pooled and per-loan structures differ sits in the contributory mortgage funds guide.
What sources support this guide?
Every substantive statement on this page comes from a regulator, a statute or a professional standard, and each was read in this build. Where a source could not be read, the point it would have supported is not made.
| Source | What it supports here | Currency |
|---|---|---|
| ASIC Regulatory Guide 45, Mortgage schemes: Improving disclosure for retail investors | The definition of a mortgage scheme and the exclusion of listed schemes; the 8 benchmarks and 8 disclosure principles; the if not, why not basis and the absence of a partial pass; where the disclosure appears and how often it is updated; and what a responsible entity is not required to disclose | Issued 5 March 2026 |
| ASIC Reports 820 and 823, private credit surveillance and the capital-markets response report | The scope and findings of ASIC's private credit surveillance; the separation-of-function and impairment-policy findings; default, fee and valuation observations; and ASIC's 10 principles for private credit done well, reproduced in both reports | Published 5 November 2025 |
| ASIC Report 814, Private credit in Australia | That borrower-paid fees are often excluded from fee disclosure, that headline management fees can understate total manager remuneration, that this makes comparison between funds difficult, and that provisioning for expected losses does not appear widespread | Published 22 September 2025 |
| ASIC INFO 159, Frozen funds and hardship withdrawals | What a frozen fund is and what a freeze does and does not mean; the 4 hardship grounds and the 6 compassionate limbs; the annual withdrawal settings and the responsible entity's discretion; members' rights to call a meeting or apply for court orders; and the complaints path | Updated March 2024, page modified 30 April 2024 |
| ASIC MoneySmart: the private credit page, and the investor guide on investing in mortgage schemes | The named risks of private credit; that assets securing loans do not prevent loss; the pooled, contributory and feeder distinction; the comparison against a prudentially regulated term deposit; and the caution about how long a withdrawal can take | Private credit page updated 18 June 2026; the investor guide is an undated legacy publication still hosted by ASIC |
| APRA: the Financial Claims Scheme pages | The deposit protection limit and the institutions the scheme does not apply to | Read August 2026 |
| ASIC: the 18 June 2026 private credit news item; the Key issues outlook 2026; INFO 207 Disputes about commercial loans; RG 271; the credit legislation FAQs; and media release 24-243MR | The regulator's current position on valuations, borrower stress, feeder funds and enforcement priorities; retail investment thresholds; the AFCA membership gap and the protection level for commercial loans; the internal dispute resolution response period; the credit law perimeter and loans to companies; and the particulars of an allegation that has not been determined | Jun 2026; Jan 2026; Apr 2024; Sep 2021; Oct 2020; Oct 2024 |
| ASIC Regulatory Guide 274, Product design and distribution obligations, and Part 7.8A of the Corporations Act | That a target market determination is required for a retail product, that distributors must take reasonable steps so distribution is consistent with it, and that the regime attaches to the responsible entity of a registered scheme rather than to a wholesale trustee | RG 274 issued Dec 2020, read Aug 2026 |
| ASIC and AFCA on the Compensation Scheme of Last Resort | The $150,000 per claim limit, the requirement for an unpaid AFCA determination, the 4 covered sub-sectors and the absence of scheme operation from them, the 2 April 2024 commencement, and AFCA's published approach to complaints against financial advice firms where a responsible entity has become insolvent | Read Aug 2026 |
| Australian Property Institute and PINZ, ANZVGP 112 Valuations for Mortgage and Loan Security Purposes | That instructions on a mortgage valuation are ideally received from the lender, and that the terms of engagement run between the party relying on the valuation and the valuer | Effective 1 January 2025 |
| ASIC Professional Registers Search, ASIC investment scam alerts and the AFCA Financial Firm Search | The public checks for registered managed investment schemes, AFS licensees and authorised representatives; ASIC's 2026 publication of licensee website addresses to help identify imposter sites; the investor-alert check; and independent confirmation of AFCA membership and complaint contact details | Read 16 August 2026 |
| AFCA Rules, jurisdiction guidance and investment-complaint guidance | That AFCA membership is necessary but not sufficient for jurisdiction; that AFCA can consider some individual complaints including misleading disclosure and non-redemption where an instruction could have been carried out; and that AFCA generally cannot consider management of a fund or scheme as a whole | Current Rules effective 12 March 2026; guidance read 16 August 2026 |
| APRA Prudential Standard APS 220 Credit Risk Management, and practice guide APG 220 | The prudential definition of a non-performing exposure, the unlikely-to-pay and 90-days-past-due limbs, the return-to-performing conditions, and that collateralisation does not play a direct role in the classification | Read Aug 2026 |
| ASIC Reports 821 and 823, the private credit fund catalogue, and Regulatory Guide 181 | The rest of ASIC's late-2025 private credit package: private capital reporting, the forward surveillance scope, the catalogue of legal obligations, and the updated conflicts guidance | Nov to Dec 2025, read Aug 2026 |
Two limits on those sources are stated rather than left implicit. The National Credit Code and the Corporations Act were not relied on here for detailed section-by-section legal interpretation, so the credit perimeter is sourced primarily to ASIC's own restatement of it and the withdrawal discussion remains general. The accounting standards governing impairment and fair value were not used to state how a fund must account for a loan that has stopped paying; the page instead reports ASIC's disclosure, surveillance and valuation findings. Regulatory guidance, thresholds, instruments and AFCA Rules can change, and everything here is current only as at the dates shown.
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