Fees and Conflicts in Australian Private Credit Funds
ASIC's REP 814 put fund fees and manager conflicts at the centre of its private credit review. Here is what the common fee lines mean and where interests can diverge.
Why fees are under the spotlight
ASIC's Report 814 (September 2025) examined private credit funds and flagged fee practices and conflicts of interest as areas requiring better disclosure. The regulator's concern is straightforward: private credit is sold largely to wholesale investors on the basis of income, but the net income an investor receives depends on how many layers of fees sit between the borrower and the investor.
The common fee lines
Management fees are charged by the manager for running the fund, usually as a percentage of funds under management or invested capital. Performance fees (or carried interest) reward the manager above a return hurdle. Establishment and arrangement fees are paid by the borrower when a loan is originated.
The question REP 814 sharpened is who keeps the borrower-paid fees. If the manager retains establishment, exit and late fees, the manager earns more on a loan than the investors whose capital is at risk — a direct divergence of interest. Some managers rebate these fees to the fund in full; others split or retain them. The fund's disclosure documents should state the treatment plainly.
Conflicts that matter in practice
Related-party lending — where a fund lends to entities connected to the manager — concentrates both return and risk inside one group and deserves close scrutiny. So does cross-fund allocation: when a manager runs several funds, which fund gets which loan, and at what price? Valuation conflicts are covered in our REP 814 explainer, but they interact with fees: a manager paid on net asset value has an incentive to hold asset values high.
Reading the disclosure
For wholesale investors, the key documents are the information memorandum and any fee and conflicts policy the manager publishes. Useful checks: the total expense load expressed as a single annual figure; the treatment of borrower-paid fees; whether the manager or its staff co-invest; how related-party loans are approved; and whether an independent valuation agent is used and how often.
None of this is personal advice — it is a reading list. Investors should obtain professional advice on any specific fund before committing capital.
General Advice Warning: This explainer is factual and general in nature only. It does not constitute financial, investment, or legal advice, and has been prepared without taking into account the objectives, financial situation, or needs of any person. Obtain independent professional advice before making any financial decision.
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