REP 820 has changed what defensible governance looks like for advised allocations to private credit. The threshold for putting the asset class in client portfolios has moved, and the change is one principals need to take seriously.
In September 2025, ASIC issued an interim stop order against the La Trobe US Private Credit Fund. The stop order was lifted on 1 October after La Trobe revised the fund’s target market determination, in particular cutting the appropriate-allocation figure for a single investor from 35% of investable assets to 10%.
A 25 percentage point reduction in what a fund manager itself considers an appropriate single-fund allocation is a useful number. It is not a regulatory ruling on the right size for a private credit position. It is a signal of how far the working assumptions in this asset class have moved in 12 months, and it should be a marker for any advice firm currently holding private credit on its APL.
The question we hear most often from principals is whether private credit still belongs in client portfolios. Our answer is that the question itself has shifted.
Private credit is not the problem. The problem is that an asset class with multi-year illiquid loans, fee structures in parts of the market that are opaque, and (in the retail segment) target market determinations that ASIC has called inaccurate, is being recommended to clients on the basis of a research house rating and a fund manager’s marketing. That has always been a thin basis for an allocation. REP 820, released in November 2025, set out the governance standard ASIC now expects. The 2026 enforcement priorities, announced the same month, named private credit as a 2026 enforcement priority and identified advised distribution to retail clients as a surveillance focus.
For a principal running an advice firm, the implication is operational. The investment process that supported a private credit allocation 18 months ago is unlikely to hold up against current expectations. The work to update it is not optional, and it is not the kind of work that can be done in an APL committee meeting between client commitments.
REP 820 surveyed 28 private credit funds. It found a market split roughly in two: funds with large institutional investors generally showed sound practice; segments aimed at retail and non-institutional investors fell short on conflicts, valuation, fee disclosure, and liquidity governance. Sixteen of the retail funds in the surveillance used the advised channel as a key distribution route. ASIC was direct about what this means: research house ratings can significantly influence advisers, but ratings are inputs to governance, not substitutes for it. The licensee who places a fund in front of a retail client carries its own assessment obligation.
Beyond the report itself, the operating environment has moved. ASIC has commenced proceedings against a research house in connection with Shield. The Shield and First Guardian investigations have produced an Interprac civil penalty action, a ten-year ban against an authorised representative, and remediation arrangements with a few platforms totalling more than $420 million. ASIC has begun refreshing the underlying guidance, and REP 823 has gone further by recommending legislative reform to the wholesale-client test and to trustee notification requirements. Taken together, this is not a single piece of regulation. It is a directional shift in what the regulator expects from any licensee handling complex products for retail clients.
Vertex’s view, and the view we are putting to the principals we are speaking with, has three parts.
First, private credit retains a legitimate role in client portfolios for the right clients in the right structures and at appropriate sizing. The asset class fills a financing gap that the banks have stepped back from, and institutional investors continue to allocate to it. The change is not that the allocation is wrong. The change is that the basis on which the allocation is made needs to be stronger than it was.
Second, the work to establish that basis is largely about process. APL inclusion should rest on documented assessment of valuation methodology, fee transparency, conflicts and related-party exposure, liquidity governance, and TMD distribution conditions. Aggregate exposure across client portfolios should sit within an explicit limit set by the IC. Ongoing monitoring should be a scheduled activity, not a response to a question from a client or a regulator. None of this is conceptually difficult. All of it is time-consuming and requires expertise that most advice firms have not built in-house.
Third, the firms that come out of this period in the strongest position will be the ones whose records show a consistent pattern of diligence over years, not the ones who scramble to document a position after a question has been asked. That is the lesson from Interprac, and it is the lesson we are taking into every conversation with a principal who has private credit on the APL.
When a principal asks us whether they should be reducing private credit exposure, our first answer is that the more important question is whether their governance can defend the exposure they already have. That requires looking at the file, not just the position. The position tells you the dollar amount and the manager; the file tells you who approved the fund onto the APL, on what basis, when the manager was last reviewed against its mandate, whether the TMD has been read against actual client circumstances, and whether the IC minutes show the analysis or just the decision. It requires a documented review against the REP 820 framework, an explicit aggregate limit, and a monitoring schedule the IC will actually follow. Some firms, having done that work, will conclude their existing exposure is appropriate. Others will conclude it needs to change. The point is that the conclusion is the output of a process, not a starting position.
The wider point for the industry is that the bar for advised investment governance has moved, and the direction is clear. The firms that build the process now, before they are forced to, will look very different in 12 months to the ones that wait. That is the conversation we are having with principals every week, and it is the work we exist to support.
