Key points
- Our markets are strong but changing – and there’s a clear consensus that it’s apt and timely for ASIC to better understand the implications of these developments.
- The growth of private markets has been a fundamental good – but we don’t want it to come at the expense of public markets. Public and private markets should complement, not cannibalise each other.
- We’ve received ideas for some sensible adjustments to help improve the health of public markets. We’re looking at them closely with a view to act – and act soon.
Check against delivery
Thanks to the group for the opportunity to say a few words. It’s lovely to see some familiar faces and I know with everything that’s going on at the moment, you’ll have a lot to talk about. There’s never been more going on in markets, at least in the past decade it feels like, so thanks for having me here.
I’d like to begin by acknowledging the Dharug people’s ongoing connection to and custodianship of the lands on which we meet today and by paying my respects to elders past and present. I extend that respect to Aboriginal and Torres Strait Islander people here today.
It is indeed a pleasure to be back at another Conexus event to speak about ASIC’s work in public and private markets – and as mentioned it’s very timely.
When we launched our discussion paper in February, I don’t think we quite realised just how much more significant world events would make these conversations, but it certainly happened quickly.
In the past two months, we’ve seen – as this room knows well – age-old markets connections broken and 60 years of global trade rules upended.
In the 72 hours after the tariffs took effect – and there’s no doubt you were busy in those 72 hours – those of you in super funds went through a real-life version of the RBA’s liquidity stress test.
Nearly $50 billion was wiped off the All Ords, we saw the highest Australian trading volumes since the onset of the COVID-19 pandemic, and we witnessed an unprecedented mass sell-off of US bonds.
Correlations perceived to be enduring truths for those of us who’ve been around markets for our whole careers seemed to almost break down in one afternoon.
Now of course, no crisis ever repeats the same way. But we do know from experience that no matter the situation, we can only control how we respond.
As the corporate and markets regulator, we have a mandate to maintain, facilitate and improve financial system performance and investor confidence.
In other words, it’s our job at ASIC to look at Australia’s markets at times like this and from cycle to cycle and ask the big questions.
Questions like where might the next shock come from and are we ready for it? How do we keep Australia’s place in the world for investors and capital? Are there market failures or barriers to participating that we need to address? And of course, are our tools and responses still match-fit for the markets of today?
Public-private markets discussion paper
It’s why the focus of our public-private markets work has been to sharpen and deepen our understanding of how our markets are working and evolving.
What we know is that private markets are growing while public markets seem to have been in decline. For the past year, we have been asking industry and experts what’s going on here and why. In our discussion paper, we set out our preliminary views.
First, that market dynamics are definitely shifting and there’s widespread interest in and concern about the implications.
Second, we don’t have the data we need to accurately assess the risk.
And third, that while this is a global phenomenon, there’s one very important, idiosyncratic factor that could make this story unfold differently here in Australia than anywhere else. This room knows best – it’s superannuation.
As part of this paper, we called for views on the “what” and the “why” of the dynamics, and for insights and actionable ideas on the “how” – how to make our markets more open, more accessible, and more attractive.
And the response has been overwhelmingly positive.
A data point that should give anyone confidence in the maturity of our Australian financial system – something I believe deeply in – is that we’ve received almost 90 submissions about the health, state, and future of our markets – and they’re still coming in this week.
I myself am reading every single one of these submissions – people take the time to write them, and we must take the time to listen – and I want to thank everyone in the room who contributed. I’m looking at some faces who’ve made contributions right now.
These submissions are from across industry – so banks, super funds, fund managers, brokers, advisers, insurers. They’re from across industry bodies, they’re across professions, across firms, across borders, across functions like operators and exchanges, and across academics, investors and individuals as well. One of my personal favourites is individuals taking the time to write about the health of our markets.
We’ve also had over 50 meetings with these stakeholders – I have been in many of those – and there’s a clear consensus that it’s apt and timely for ASIC to better understand the implications of these market developments.
Our markets are strong but changing. So while views that the decline in public market activity is structural are cautious, there’s a confident recognition that private markets growth is indeed a structural change in our markets – and many companies appear to be choosing to stay or go private over being listed.
The growth of private markets has been a fundamental good – but we don’t want it to come at the expense of public markets.
Public and private markets should complement, not cannibalise each other, and the public participation and utility functions of a listed equities market cannot be forgotten.
Through the consultation, we’ve received ideas for some sensible adjustments to help improve the health of public markets. We’re looking at them closely with a view to act – and I would say act very soon.
This includes prioritising IPO-related regulatory changes to make the process of getting listed more streamlined, as well as looking at other ideas to make staying listed easier.
We’ll have more to say on this in coming weeks and months, but I want to make the point that this won’t all be one quick fix.
Some of the ideas – like on governance differences between public and private companies – raise wider policy issues for bodies other than just ASIC, and will require broader reflection, endorsement, and engagement. But we want to say now, we have heard you on these, too.
We’ve also received a clear message that ASIC shouldn’t rush to new regulation and undermine Australia’s competitiveness in a global marketplace.
So, I want to assure this room today that we aren’t looking to shoot first, ask questions later. If anything, our approach could be described as measure twice, cut once.
We’ve said all along that we’re looking to understand what’s happening in markets and what, if anything, we can do to build confident and informed participation in them.
We’ve also said all along we’d be transparent about the process, and open about the feedback and our thinking.
So, in that spirit, I now want share with you three of our key insights and some early direction of travel in our thinking – and it’s the first time we’ve spoken publicly in this regard.
Private markets are here to stay
The first insight is that private markets are here to stay and here to grow.
As mentioned, this growth represents a structural change in our markets, and one that’s in step with the rest of the world.
In the past decade, private capital assets under management have tripled – both in Australia and across the globe. We now have single private asset managers approaching trillion-dollar values, and these private players are playing in every part of the capital stack.
Indeed, a key piece of feedback we received was that at ASIC, we have seriously underestimated the size of the private prize, but more on gaps in our data like this later.
It’s fair to say that this growth has fundamentally been good for Australia and our economic prosperity. It also signals a good level of investor confidence in our existing regulatory framework.
What we’ve heard is that “private” is not shorthand for “risky”. Private markets are in the main meeting institutional investor needs, and current laws are generally promoting good investor outcomes when it comes to institutional dealings. Indeed, one of our attractive features in this time of renewed volatility is that Australia is a safe place to invest.
We’ve also heard that the growing availability of private capital has met a real need, and if done well, private credit is good for both sides of the economic equation – investors and borrowers – and can complement the banking system.
But while there’s limited desire for increased regulation of private markets, there is an openness to increased supervision, especially when it comes to things like valuation of assets, management of conflicts of interests, management of sensitive information, meaningful and effective disclosure of fees and risks, fair treatment of different investor types, as well as further information from ASIC on what good could look like.
On private credit in particular, we’ve heard calls for consistent standards across the industry and for further engagement from ASIC.
I think this a clear indicator of the maturity of the Australian market, and commensurate with our level of funds under management.
So, while the regulatory framework is generally sound, we see scope for targeted enhancement and improvement, and for more active and ongoing monitoring and supervision in wholesale and retail private markets.
Mature superannuation is shaping the market
The second insight is about the role of superannuation in shaping and facilitating access to private markets.
We’ve heard Australia’s superannuation investors are a significant – if not the most significant – influence and investor class shaping the nature and quality of our Australian markets.
We have also heard that this is a mature investor class, that existing regulatory settings have contributed to the strong growth of the sector but also to its growing investment and asset management maturity.
Australia has the world’s 55th largest population, but the fourth largest pool of retirement savings, with more than $4.1 trillion funds under management, including $2.9 trillion in APRA-regulated funds[1].
In the next decade, we’ll surpass the UK and Canada to become the world’s second largest system[2].
That growing footprint of superannuation on our markets – on our market’s size, shape, quality, and integrity – is a feature that’s here to stay, and we need to evolve our regulatory approach – the shoe – to fit that footprint. We also need to think about “what’s leftover” for retail direct investment in a market with such significant institutional players.
We’ve also heard that institutional investors – such as super, and other fund managers – are focused on improving measures to support market integrity in a manner consistent with their footprint, such as information sharing and the management of conflicts and risk.
We are seeing an appetite though for more insight on what good looks like in terms of governance, disclosure, and conduct practices. There is more for us to do here in this regard.
Finally, we have heard from the funds themselves of the importance of the work being done alongside APRA and the RBA on robust valuations and the intersection of liquidity management.
Here I want to recognise of course the important role of our sister regulator APRA in setting and supervising standards for superannuation funds and I want assure the sector that we will work to be complementary and not duplicative in these efforts.
More work is needed on data and transparency
The final insight is around data and transparency.
To do our job effectively, regulators need to be well informed about our markets.
However, we’ve learnt from both global players and from global peer regulators that we are out of step when it comes to data reporting in this space.
Case in point – numerous submissions were actually better placed to size up the private market here in Australia than we were. They pointed it out and found we were seriously underestimating it.
Think about it like this. According to S&P IQ and Bloomberg, 96 per cent of companies with more than $100 million in revenue in Australia were private as of last December.[3]
However, according to the ATO, 85% of companies with that level of turnover were private as of 2023[4].
Both numbers represent the enormity of the “private” market economy. Both numbers dimension the private market as larger than we had previously captured. But side by side, both numbers make it clear we’re looking at different angles of the same object and not seeing the full picture.
This isn’t just an issue for regulators – the market itself is telling us it may need more transparency as it grows and matures, and that we can learn from global best practice in this regard.
It’s clear from our engagements that many see value in providing greater transparency about the size, composition, and trends of the sector, along with key terms of disclosure and risk description, especially in the private credit space.
However, this doesn’t mean transparency for transparency’s sake.
We respect there’s value and importance in elements of private staying private, and we have to strike the right balance between a line of sight and a floodlight.
There’s also a clear expectation of course that ASIC, APRA and other regulators connect the dots with the information that we already have and work out where the gaps are.
As we reflect on what comes next, I want to assure you all here today that any changes will be informed by rigorous analysis and a commitment to keeping in step with global regulatory best practice.
We will work with market experts to better understand transparency and data requirements in peer global markets, and to learn how we can best set the Australian market up for success through confident and informed participations by Australians.
Conclusion
To conclude, I’d like to borrow a quote from BlackRock founder Larry Fink[5]. Many of you may have already heard it but it was shared with us via Blackrock’s submission and sums up what we’re trying to do here.
"Markets, like everything humans build, aren’t perfect. They reflect us—unfinished, sometimes flawed, but always improvable.” And I would personally say, always loveable.
I’d like to warmly thank everyone who has contributed their insights, ideas, and time to help improve our public and private markets – deep appreciation from ASIC for that time.
This is a critical discussion at a critical time, and this conversation will help build the future of our markets and ASIC.
We are only just getting started. There’s more work to do and more to come, and I look forward to continuing the discussions – including here with you now.
Thank you.