Australia’s evolving capital markets - a discussion paper on the dynamics between public and private markets.
The Australian Securities and Investments Commission (ASIC) has released a discussion paper to examine the evolving dynamics between public and private markets in Australia. The paper highlights key trends, risks, and regulatory challenges, seeking feedback from market participants on how to maintain a balanced and efficient capital market system.
Key Trends in Capital Markets
Public Markets Under Pressure
· The number of listed companies in Australia has declined, following global trends.
· IPOs are at their lowest levels in over a decade, with many companies choosing to remain private or list overseas.
· Public equity markets remain critical to capital formation, providing transparency, governance, and liquidity.
· The Australian market is heavily concentrated, with financial and mining sectors dominating.
Rapid Growth of Private Markets
· Private equity and private credit markets are expanding, offering alternative funding options.
· Global private capital assets under management (AUM) have tripled in the last decade to USD 14.6 trillion.
· In Australia, private capital AUM has grown from AUD 57.1 billion (2014) to AUD 148.6 billion (2024), driven by increased investor interest.
· Private markets attract investment due to their higher return potential, but lack transparency, liquidity, and standardised regulations.
Superannuation’s Influence on Capital Markets
· Australia’s superannuation system now holds AUD 4.1 trillion in assets, surpassing the market capitalisation of the ASX.
· Funds are shifting towards private markets, increasing exposure to private equity, infrastructure, and private credit.
· This shift may impact liquidity, valuation accuracy, and investor protections.
Regulatory Considerations and Risks
ASIC is focused on ensuring both public and private markets function effectively while protecting investors and maintaining confidence.
Key Regulatory Concerns
1. Public Market Vitality
· Public equity markets provide transparency, governance, and accessibility, but their decline poses risks.
· ASIC is assessing whether regulatory barriers discourage IPOs and how listing requirements can be streamlined.
2. Risks in Private Markets
· Private markets lack oversight, raising concerns about valuation accuracy, illiquidity, and leverage risks.
· ASIC is evaluating whether more regulatory intervention is needed to address these issues.
3. Retail Investor Access and Protection
· Retail investors have limited access to private markets, which reduces diversification opportunities.
· However, increased participation without adequate protections may expose them to higher risks.
4. Transparency and Data Challenges
· Private markets lack sufficient reporting and disclosure standards.
· ASIC is advocating for better data collection and oversight to enhance market monitoring.
Next Steps and Industry Engagement
ASIC is seeking industry feedback on key questions related to:
✅ The structural vs. cyclical nature of market shifts.
✅ Superannuation’s role in shaping capital markets.
✅ The need for greater alignment between public and private market regulations.
✅ Data improvements to better assess risks and market conditions.
Responses to the discussion paper will shape ASIC’s regulatory approach in 2025 and beyond.
This discussion paper is an important step toward ensuring Australia’s capital markets remain competitive, transparent, and well-regulated. With private markets growing rapidly, ensuring a balance between investor protection, market efficiency, and accessibility is critical.