Strong private markets require more than well-structured assets. They require governance capable of acting independently when circumstances change.

The administration of the Bathla Group has intensified scrutiny of Australia’s private-credit market. The immediate discussion has focused on leverage, security, valuations and prospective recoveries. Those issues are important, but for fund managers, allocators and fiduciaries the more enduring question concerns the quality of governance surrounding private assets.

Bathla does not establish misconduct by any fund manager, trustee or lender, and it should not be assumed that a different governance structure would have prevented distress. It does, however, demonstrate why private-market infrastructure must be designed to identify, challenge and manage conflicts before a borrower enters administration.

Private credit remains essential

Private credit is an increasingly important source of capital for property, businesses and infrastructure. It can provide speed, flexibility and tailored financing where conventional lenders may be constrained. For investors, it can deliver income and portfolio diversification.

The appropriate response to market stress is therefore not to retreat from private credit. It is to strengthen the institutional foundations that allow the asset class to scale responsibly: clear mandates, disciplined underwriting, reliable administration, independent asset custody, transparent reporting and credible fiduciary oversight.

The challenge is the concentration of functions

Private-credit managers often perform several interconnected functions. They may originate a loan, negotiate terms, earn borrower-paid fees, monitor performance, assess credit deterioration, influence valuation, report returns and manage liquidity. This integrated model can be efficient, but it creates predictable tensions when an asset underperforms.

The solution is not to presume poor conduct. It is to ensure there is an appropriately empowered party able to challenge the manager objectively and act in the interests of investors as a whole.

• Is aggregate borrower exposure being measured across associated entities and projects?
• Are valuations current, supportable and independently challenged?
• Are covenant waivers and extensions genuinely in investors’ interests?
• Do redemption terms reflect the liquidity of the underlying assets?
• Are related-party arrangements transparent and conducted on appropriate terms?

Asset diversification is not always risk diversification

A portfolio can contain multiple loans secured over different developments and still be economically concentrated. Where projects rely on the same sponsor, treasury operation, management capability and refinancing access, their risks can become highly correlated during stress.

Institutional-quality governance therefore requires a look-through view of the borrower ecosystem. Facility-level loan-to-value ratios remain relevant, but they are not a substitute for assessing sponsor leverage, completion funding, refinancing dependency, presale risk and the potential interaction between projects.

Security must be continuously tested

Terms such as “first mortgage” and “senior secured” describe legal ranking. They do not, by themselves, determine economic recovery. Realisable value can change through construction delays, cost escalation, settlement risk, enforcement expenses, additional completion funding and market movements.

The governance question is not simply whether security existed at origination. It is whether its value, enforceability and sufficiency were independently tested as circumstances evolved.

This is especially important for construction and development lending, where an “as if complete” valuation may differ materially from the amount that could be realised in a distressed or incomplete state.

Valuation and liquidity must be governed together

Open-ended private-credit funds can offer periodic liquidity against assets that do not trade readily. That model requires disciplined liquidity planning, reliable valuations and equitable unit pricing.

A liquidity restriction is not necessarily a sign of governance weakness. It may be a prudent mechanism to protect investors while information is incomplete. The critical issue is whether the decision is made transparently, consistently with the fund documents and under oversight focused on the collective interests of investors.

Independent fiduciary oversight becomes particularly valuable at these pressure points. It provides a party capable of challenging valuation assumptions, assessing fairness between entering, redeeming and remaining investors, and testing whether commercial considerations are influencing liquidity decisions.

What institutional-quality oversight should cover

Independent governance should not duplicate the investment manager or second-guess every credit decision. Its purpose is to establish decision rights, escalation triggers and evidence standards that protect the integrity of the fund.

Governance domain – Independent oversight focus

• Mandate Approve clear portfolio parameters, concentration limits and escalation triggers.
• Credit monitoring Require timely reporting of covenant breaches, arrears, adverse information and sponsor-level exposure.
• Valuation Challenge methodology, assumptions, impairment timing and the use of external evidence.
• Liquidity Test redemption settings, stress scenarios and equitable treatment across investor cohorts.
• Conflicts Review manager remuneration, related parties, fee allocation and decisions involving extensions or restructures.
• Disclosure Ensure reporting clearly explains portfolio composition, security, concentration, liquidity and material changes.

A proportionate model of independence

Structural independence can be achieved through different models, depending on the legal form, investor base, complexity and scale of the fund. An external responsible entity or trustee may be appropriate in many structures. Other funds may combine independent directors, valuation specialists, compliance committees, administrators, custodians and formal reserved matters.

The test is substantive rather than nominal: does the oversight framework have sufficient information, authority, capability and economic independence to challenge the investment manager and act when investor interests require it?

Implications for fund managers and allocators

• Fund managers should map all functions and incentives across origination, management, valuation, administration and liquidity.
• Boards and trustees should define trigger events that require independent valuation, impairment review or escalation.
• Allocators should diligence borrower-group concentration and governance architecture, not only individual asset security.
• Investor reporting should distinguish cash income from capitalised interest and explain material refinancing dependencies.
• Fund documents should clearly allocate authority for valuation, suspensions, restructures, enforcement and conflicts.
• Governance should be designed at launch and tested during emerging stress, not added after a default.

SILC’s perspective

At SILC, we view governance as core private-markets infrastructure. Independent trusteeship or responsible-entity oversight, fund administration, asset custody, compliance and reporting should operate as a connected control environment while retaining clear separation of duties and decision accountability.

The purpose is not to remove risk. Private-market investors knowingly accept investment risk. The purpose is to ensure that risks are measured consistently, conflicts are managed credibly, information is reliable and difficult decisions are subject to independent scrutiny.

This distinction will become increasingly important as private capital broadens its investor base and becomes more significant to Australia’s financing system. Managers that adopt institutional governance voluntarily can strengthen investor confidence, demonstrate regulatory readiness and build more resilient long-term platforms.

Conclusion

Bathla may ultimately be remembered as a major property-development administration. Its more valuable legacy would be a sharper industry focus on the governance architecture surrounding private credit.

The strongest private-credit platforms will not be those that claim risk can be eliminated. They will be those that demonstrate how risk is independently challenged, transparently reported and fairly managed when conditions deteriorate.

Governance does not replace investment judgement. It makes that judgement more accountable, more transparent and more resilient.

Sources and notes

This article is a policy and governance analysis, not a finding of misconduct or legal advice. Public facts remain subject to the administrators’ investigations and further disclosure.
1. ASIC Report 820, Private credit surveillance: retail and wholesale funds. ASIC’s November 2025 review addresses disclosure, governance and conflicts, valuation, liquidity and credit-risk management across retail and wholesale private-credit funds. https://download.asic.gov.au/media/q42bgduw/rep820-published-5-november-2025.pdf
2. ASIC Report 814, Private credit in Australia. Released 22 September 2025, providing ASIC’s market-wide assessment of Australian private credit. https://asic.gov.au/regulatory-resources/find-a-document/reports/rep-814-private-credit-in-australia
3. ASIC submission: Review of the regulatory framework for managed investment schemes. ASIC’s September 2023 submission addresses scheme governance, board representation, liquidity and other reform matters. https://treasury.gov.au/sites/default/files/2023-11/c2023-404702-asic.pdf
4. ASIC Regulatory Guide 132, Funds management: Compliance and oversight. Guidance for responsible entities and other oversight participants, with parts relevant to wholesale scheme operators. https://asic.gov.au/regulatory-resources/find-a-document/regulatory-guides/rg-132-funds-management-compliance-and-oversight
5. ABC News, Major NSW property developer Bathla Group enters administration. Reports the appointment of Teneo and approximately $3.2 billion in liabilities reported by Universal Property Group as at 30 June 2025. https://www.abc.net.au/news/2026-08-25/major-developer-bathla-group-administration/107074304
6. ABC News, Private credit firm limits investor redemptions following Bathla administration. Reports broad private-credit exposure, fund-level liquidity responses and the range of reported lender exposures. https://www.abc.net.au/news/2026-08-28/cvs-lane-joins-list-of-firms-limiting-investor-redemptions/107089304

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