The dynamics between public and private markets in Australia are shifting, raising critical questions about the future of capital formation. ASIC recently released its discussion paper, Australia's Evolving Capital Markets: A Discussion on the Dynamics Between Public and Private Markets, inviting feedback on how to manage this evolving landscape.

With private capital on the rise and public listings in retreat, this paper highlights a growing regulatory push to reassess and recalibrate the balance. But beyond regulation, the core question remains: what does this mean for businesses, investors, and the long-term health of Australia's capital markets?

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Why is this important?

According to ASIC data, IPOs in Australia are at a decade low. The value of capital raised via IPOs fell 82% from 2014 to 2024. In contrast, global private market Assets Under Management (AUM) tripled to $22 trillion in the same period. Australia mirrored this growth, with private market AUM rising from $57 billion in 2014 to $148 billion in 2024.

Private equity and real estate accounted for the largest portions of Australia-focused private capital fund assets, totalling $66 billion and $58 billion, respectively. Simply put, companies are increasingly choosing private funding over going public. This trend has sparked ASIC's concern about the future viability of Australia's public equity markets.

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Why does it matter?

For restructuring professionals, this could mean increased oversight of private capital flows, more distressed opportunities in private credit, and evolving enforcement considerations.

For market participants, it prompts them to assess how ASIC's interventions may affect deal-making and the potential influence of superannuation funds on market structures. Currently, Australian superannuation funds manage $4 trillion in AUM and account for 23% of ASX market capitalisation. Their growing size and concentration are reshaping market dynamics.

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Why are companies choosing to stay private?

Because they can—and because it allows them to avoid the burden and cost of complex listing requirements. These include earnings pressures (quarterly in the U.S., half-yearly in Australia), activist shareholder demands, media scrutiny, and ongoing governance, compliance, and stakeholder management challenges.

Today, companies can raise substantial private capital, enabling them to delay or bypass IPOs altogether. While private markets offer flexibility and control, they come with a trade-off—limited liquidity. Unlike public markets, where investors can easily sell shares, private investments lock in investors, as they expect higher returns to compensate for this illiquidity.

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What is ASIC doing?

With retail investors increasingly accessing private market strategies, ASIC is intensifying its scrutiny to address risks and ensure investor protection. Key focus areas include valuation transparency, conflicts of interest, leverage risks, and investor disclosures—critical concerns in the fast-growing private market.

Some investors, like Zagga Group Australia—an alternative non-bank lender and one of the firm’s clients—officially support greater regulatory oversight, recognising the need for credibility in the sector. Others, particularly those in less regulated corners of the market, may resist or remain silent.

Beyond investor protection, ASIC is also examining whether current regulations inadvertently discourage public listings. Areas under review include IPO barriers, the impact of superannuation flows, and whether retail investors are excluded from key investment opportunities.

ASIC is actively seeking feedback from market participants—making this a crucial time for those in restructuring, private credit, and alternative lending to help shape the regulatory landscape.

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Is the risk of private credit failures systemic?

Rising interest rates, economic uncertainty, and greater reliance on alternative lending make private credit failures increasingly likely. Investors anticipate that distressed debt scenarios and enforcement actions will become more common, particularly in sectors grappling with liquidity stress.

Though there is limited data on private credit-led insolvencies, ASIC tracks insolvencies by industry. According to ASIC, insolvencies rose approximately 40% year-on-year, with the construction industry seeing a 35% increase to 2,977 appointments in the last financial year.

But are these failures systemic? Not at this stage. While individual collapses may affect borrowers and investors, the current scale of Australia's private credit market suggests these failures will remain contained, posing minimal risk of widespread financial instability.

The key question is whether regulators, lenders, and market participants are prepared. Will private market transparency, investor protections, and enforcement mechanisms evolve quickly enough to prevent avoidable damage?

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What’s next?

ASIC's paper invites market feedback. Those interested in reading more can access the discussion paper here.

For industry participants, now is the time to consider how these regulatory shifts could impact operations, capital raising strategies, and market positioning. Engaging with the consultation process offers an opportunity to shape future regulatory outcomes.

Staying informed is important. Organisations should review their current exposure to private market dynamics, reassess compliance frameworks, and prepare for potential changes that could reshape market access and investor engagement.

Understanding these evolving dynamics is essential for market participants to navigate potential risks and seize emerging opportunities.

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