Dwindling listed equity numbers, whether the next financial crisis lies in private credit and other private markets, and the growing influence of superannuation funds on markets are on the list of key considerations for Australia’s financial regulator.
The Australian Securities and Investments Commission on Feb. 26 called for answers to a number of questions raised in its discussion paper on "Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets." The regulator has been engaging with stakeholders through panels, forums and structured engagements on changes in the public and private markets.
The regulator wants to answer its key questions of whether interventions are needed to address risk in Australia’s markets or whether there needs to be an adjustment to how rules operate in order to take advantage of opportunities that would make the country’s capital markets more attractive.
Australia’s A$3 trillion ($1.88 trillion) public equity market, like other international markets, has seen dwindling numbers in terms of initial public offerings and their value. While the value of companies listed on the Australian Stock Exchange has grown by 91% to A$3 trillion over the past decade, the number of equity issuers has fallen by 4% to 1,989, and the value of equity raised in IPOs was down by 82% in 2024 vs. 2014, to A$4.2 billion.
“We can’t be complacent about the future of Australia’s public equity markets,” Joe Longo, chair of ASIC, said in a news release accompanying the paper. “While history tells us that the current downturn in Australian IPOs and public companies is likely cyclical, deterioration in the quality, diversity and depth of public companies would have significant adverse effects on the economy and on investors’ participation in it. While we don’t see regulatory settings as the dominant factor here, there may be opportunities to adjust in order to improve the attractiveness of our markets."
The regulator is also looking at Australia’s A$148.6 billion private markets and is concerned about private credit in particular. Private markets assets under management have grown by 161% over the decade, and while private credit “does not appear to be systemically important in Australia, failures are on the horizon, and at current volumes it is untested by prior crises,” Longo said. Australia’s private credit market is A$2.8 billion.
That figure is dwarfed by global private capital AUM of almost $15 trillion.
“The significant growth means regulators need to be equipped with robust data to identify and respond to risks,” the discussion paper said. “In Australia, private market growth is significant, albeit from a low base in some asset classes, such as private equity and private credit funds. The economic, financial and institutional drivers of their growth appear to be structural and they will be increasingly important to the success of capital markets.”
The regulator is increasing its focus on private credit, “not to constrain participation but with a view to being well informed and to test whether investment offers comply with existing laws,” the paper said. Longo added in the release that the regulator had noted that “international peer regulators have access to more reliable and recurrent data on private markets to enhance their transparency,” which he said makes it easier to identify risks and opportunities.
“At present, ASIC’s data and information-gathering powers are inefficient and incomplete. We simply can’t do our job properly if we are in the dark,” Longo said.
The third area of interest for the regulator is the country’s super funds — the size of which overshadows the country’s public equity market with A$4.1 trillion ($2.6 trillion) in assets and growing. This week, the Super Members Council in Australia projected huge growth for super funds, with an expectation that they will surpass $7 trillion in assets mark by 2040.
“We are keen to understand how the growing dominance of superannuation in Australia’s economy is influencing our markets, given its crucial role in securing our financial well-being on retirement,” Longo added.
The discussion paper closes to comment on April 28.
