ASIC boss Joe Longo unveils push into private share, debt markets as concerns rise about super transparency

The Federal watchdog is stepping up its scrutiny of private credit and private equity markets to deal with growing concerns tens of billions flowing away from public scrutiny.

Amid increasing concerns about the valuation of unlisted assets in the $2.7 billion-plus superannuation industry, the Australian Securities and Investments Commission is setting up a specialist team to deal with booming private markets.

ASIC chair Joe Longo said the review of private markets would be a top-five priority over the next 12 months and would include whether his agency’s activities were encouraging “regulatory arbitrage” away from public markets.

Mr Longo said this was not just some “esoteric” regulatory issue.

He warned it involved Australia’s retirement savings given super funds hold about one-third of shares listed on the ASX and are big backers of private equity and private debt funds.

“They have a huge amount of money to invest and are in a strong position to take public companies private,” he said. “The superannuation funds are having a profound impact on the capital markets in Australia.”

Industry super funds have been big investors in privately-held properties, infrastructure and debt plays, giving them a buffer against the fluctuations in public investment markets.

But regulators have raised concerns about delays in re-valuing private held and managed assets in light of downturns in office building valuations since the COVID-19 lockdowns began in 2020.

At a conference in Sydney on Wednesday morning, Mr Longo revealed his ambition to create “a level playing field between private and public markets”.

“We don’t want misconduct, we don’t want conflicts of interest, we don’t want poor valuation practices, we don’t want investors being misled,” he told the Bloomberg conference.

“The issue with the private markets is we don’t have the same level of transparency as we do with the public markets.”

ASIC is not the only regulatory responsibility for private debt and equity plays.

It also has a joint role with the Australian Prudential Regulation Authority in regulating industry, retail and corporate super funds.

APRA recently wrote to super fund managers warning they were not revaluing their unlisted asset portfolios frequently enough in times of volatility.

These APRA-ASIC regulated funds had net assets totalling $2.7 trillion, with reportedly around one-fifth of this tied up in privately traded assets.

Self-managed superannuation funds overseen by the Australian Taxation Office had assets estimated to total $933 billion.

Mr Longo said big super funds and other private equity backers had traditionally cashed in their investments through share market floats.

But Australia’s top investment regulator said the overwhelming movement of money away from public markets was raising concerns about the liquidity of these private investments.

“We don’t prefer one market over the other,” he said.

“I am more concerned about market integrity. We don’t know as much about what is happening in the private markets as the public markets.”