Metrics response to ASIC’s report on Advancing Australia’s Evolving Capital Markets
Attributable to Metrics Group CEO and Managing Partner, Andrew Lockhart:
Metrics Credit Partners (“Metrics”) welcomes ASIC’s roadmap to promote strong, efficient, and globally competitive capital markets in Australia and the acknowledgement that ‘private credit when done well is good for the economy’.
As a leading Australian private asset management firm, with more than $30 billion in assets under management, we see firsthand the essential role private credit is playing in driving the Australian economy, allowing businesses to scale, accelerating housing developments that would otherwise stall and driving productivity through job creation and increased tax revenue.
Metrics invests across the capital structure, inclusive of both private debt and equity investments. While our debt investments are the majority of our activities, our smaller equity investments in real estate alone currently support close to $40 billion of economic activity, over 90,000 jobs and more than 10,000 homes under construction.
To ensure investor confidence and that the sector grows sustainably, Metrics strongly supports ASIC’s calls for the industry to deliver ‘enhanced’ and ‘consistent standards’ and we will look to play a leading role.
Importantly, Metrics is an experienced manager with scale, using our networks to originate high-quality investment opportunities, diversify portfolios, and actively protect investor capital. We fundamentally believe that investors should partner with experienced managers who can demonstrate disciplined capital deployment and proactive risk management.
Our approach is underpinned by a clear focus on governance, including independent trustees, detailed quarterly portfolio reports for investors, and independent portfolio review, impairment testing and market pricing services provided to fund trustees.
| Principles for private credit done well (Table 1.2) ASIC report | Metrics Response |
|---|---|
Stewards of other people’s money RE and Trustee boards should actively oversee fund operations, including valuations, conflicts, liquidity and impaired assets to ensure fair and proper conduct. | Perpetual and EQT are independent Responsible Entities / Trustees across all Metrics funds. Metrics believes well-resourced, specialist, independent RE / Trustees reflect market best practice. |
Organisational capability Maintain adequate staffing, systems and capital with regular reviews as funds grow in size. Ensure appropriate expertise and experience in leadership and staff, including in credit risk, compliance, systems support, valuation, reporting, liquidity and conflict management. Undertake appropriate monitoring and supervision including corporate authorised representatives. | Metrics is an experienced, asset manager of scale with an established track record of success, managing in excess of $30 billion in assets and employing more than 500 staff across nine offices. We have a strong track record and continue to make significant investment in key areas to support the growth in our assets under management. These areas include investments and portfolio risk management, legal, risk, compliance and internal audit, finance, accounting, fund administration, asset services, information technology, treasury and capital markets. As our business continues to grow, we will continue to ensure there is appropriate segregation of duties, and continue to invest in specialised, highly credentialed professionals in order to continue delivering for our investors. To assess and benchmark our internal processes, Metrics engages an independent expert to undertake an annual operational risk review. |
Transparency Adopt consistent reporting practices and terminology including timing, form and substance. | Metrics releases monthly and quarterly portfolio reporting (covering the past five years), detailing, among other things, portfolio size and composition, credit quality, valuations and loan performance. This information is intended to give investors confidence in the quality of the Metrics portfolios. These reports use data points and calculation methodologies (which are explained and defined where relevant) with the aim of helping investors better understand the funds and their performance. Consistent with ASIC’s commentary, we intend to continually review and update our reporting to do our part in augmenting industry standard approaches to reporting |
Design and Distribution Determine an appropriate target market, taking care that is reflects any high risk or complex fund structures or features. Strengthen distribution oversight to ensure product suitability (including via platforms).Platforms provide clear and accessible information. | Metrics and the RE/Trustees takes our DDO obligations very seriously, and regularly monitors in cooperation with our RE/Trustees the appropriateness of Product Disclosure Statements and Target Market Descriptions. |
Fees and Costs Disclose all fees and income streams (e.g. management and performance fees, borrower-paid fees, origination margins, default interest.) Be clear about the manager’s total remuneration. Avoid complex fee and margin structures that obscure the true cost to investors. | Metrics discloses fees in its offer documents and on an ongoing basis in line with regulatory guidance (RG97). We will continue to review the recent publications produced by ASIC in relation to fees and disclosures. |
Conflicts of Interest Avoid arrangements (i.e fees, interest, co-investment, loan structuring) that unduly favour one party. Ensure clear and fair allocation across funds. Disclose related-party transactions and multiple exposures to the same borrower with independent oversight. | All Metrics funds have independent Responsible Entities/Trustees overseeing investment management compliance, conflicts and governance more generally. This incorporates engaging independent third parties to oversee and review certain aspects of Metrics funds reporting directly to the RE/Trustee of each fund. Metrics also has a conflicts management framework which includes its Conflicts of Interest and Connected Party Transactions Policy overseen by the Metrics’ Board Audit and Compliance Committee. Metrics also has an asset allocation policy to promote fair allocation practices. |
Governance Establish well-defined, documented roles, decision-making and escalation processes with clear accountability. Embed a culture of risk awareness, compliance and transparency. Empower staff to challenge poor practices. Ensure independent oversight with RE’s and trustee boards independent of the business. Avoid overly complex structures that heighten the risk of conflicts and unfair treatment of investors and borrowers. | Metrics continues to focus on good governance to ensure its governance framework is scalable, fit for purpose and provides confidence to our investors. We believe that strong governance is essential to deliver on our strategic goals, investment outcomes for our investors and accountability. For example, this year, reflecting the growth of our business, Metrics has, or is finalising action to further enhance its governance structures, including: This is in addition to Perpetual and EQT who continue to act as Metrics’ independent Responsible Entities/Trustees. 1 Subject to obtaining necessary approvals and changes to applicable fund documentation. |
Valuations Implement clear and consistent valuation methodologies, policies and processes that produce fair valuations. Undertake valuations regularly (monthly or quarterly), with appropriate independence. Include periodic external audits. | Perpetual, as Metrics’ Responsible Entity/Trustee, has engaged an international accounting firm to conduct independent portfolio review, impairment testing and market pricing services as it relates to credit investments and a recurring valuation engagement for equity investments. This firm reports directly to Perpetual on a monthly, quarterly and semiannual basis on various aspects of valuation. Additionally, the external auditor (KPMG) of the funds examines valuations on a semi-annual schedule. All real estate loan transactions are diligenced with the benefit of independent valuations addressed to Metrics. Importantly, material credit events or downgrades are communicated to the fund’s RE/Trustee. Metrics is also finalising the establishment of a separate Valuations Committee, to be led by an Independent Chair. No Investment Committee Members will sit on this committee. |
Liquidity Disclose redemption terms, liquidity gates and stress testing practices to investors. Ensure the source of funds for distributions is sustainable and stems predominantly from cashflows generated by underlying assets. Avoid paying distribution from investor capital or that of new investors. | Metrics carefully manages liquidity and has a strong track record having always paid redemptions promptly and within permitted timeframes for all our funds. As private debt investments are not traded on public exchanges, liquidity is primarily derived from the staggered maturity of the underlying loan assets. A Capital and Liquidity Risk Management Committee is being established as part of the decision to separate out this function from the existing MCP Investment Committee. This committee will be responsible for monitoring fund liquidity and capital management, including liquidity stress testing across all funds. Metrics funds are well diversified with varying maturities and refinancing dates, which creates consistent monthly returns of capital which are typically reinvested in new investments but can also fund redemptions. |
Credit Risk Apply standardised credit assessment and monitoring frameworks as part of a well governed and documented risk management framework. Document credit decisions and risk ratings and regularly review borrower performance. Establish escalation protocols for early signs of distress. Use portfolio stress tests. Apply a consistent approach to impairments and ensure independent oversight of credit, default and impairment processes. | Metrics applies a formal, multi-layered investment and credit risk management framework that governs the investment lifecycle. The Portfolio & Risk Management team works alongside our Origination teams—who take full ownership from origination to exit—to undertake rigorous due diligence, and ongoing credit risk assessment reporting to the Metrics Investment Committee. Every investment requires co-signoff with the Investment Committee, which also approves any amendments throughout the life of the investment. This disciplined approach, backed by robust governance, transparency, and oversight, underpins Metrics’ strong track record in capital preservation and performance. While we have conviction in the quality of our credit risk management capability, we will continue to augment our practices in line with industry practice and in consideration of ASIC commentary. |
Read full statement and appendix here
Disclaimer: Metrics Credit Partners Pty Ltd ABN 27 150 646 996 AFSL 416 146 (Metrics). All rights reserved. While all due care has been taken in preparing this document, Metrics makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Reproduction of any part of this document is prohibited without the express permission of Metrics. The content is for educational or information purposes only and is not intended to provide you with financial advice. It has been prepared without taking into account your objectives, financial situation or needs. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, Metrics excludes all liability for any loss or damage arising in any way due to or in connection with the publication of this content, including by way of negligence. Past performance is not an indicator of future performance. Forward looking statements should not be relied upon. All investments contain risk and may lose value.
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