Business leaders want ASIC to open up public markets, go easy regulating private assets

It’s too soon to give up on public sharemarkets said Future Fund boss Raphael Arndt. ‘We’d pick public every day of the week,’ he told ASIC’s chair Joe Longo. Barrenjoey’s Guy Fowler said it wasn’t just about regulation.

Melbourne University professor of finance Carole Comerton Ford and Future Fund boss Raphael Arndt. Picture: The Australian / Monique Harmer

Australia’s biggest investors and dealmakers want the corporate regulator to work harder to make public markets more attractive as the future home of the economy’s best businesses.

They also pushed back against regulatory interventions in private markets, the apparent enemy of the shrinking ASX, claiming unlisted investments are already subject to significant scrutiny and the regulatory arbitrage didn’t explain private markets’ success.

The Australian Securities & Investments Commission is mulling changes to how public and private companies are regulated with a view to arresting the decline of floats and minimising the potential for loss in nascent assets like opaque private lending.

Future Fund chief executive Raphael Arndt preferred public assets over private: “We’d pick public every day of the week,” he told the regulator’s forum in Sydney on Tuesday.

ASIC chair Joe Longo said the regulator was focused on managing conflicts of interest and issues of disclosure in its review.

Barrenjoey executive chairman Guy Fowler, ASIC chair Joe Longo, Future Fund CEO Raphael Arndt. Picture: The Australian / Monique Harmer

Mr Longo said there was a “window” to design the regulations to do this. But he acknowledged the concerns of the financial sector that ASIC risks piling more regulation on top of existing rules.

“We need to simplify our approach,” he said.

Apollo’s head of Asia Pacific, partner Matthew Michelini, said there should be principles around valuations of private assets, and a need for third-party validation of prices.

UniSuper director and Virgin Australia chair Peter Warne recalled how listed real estate investment trust prices lunged after interest rates increased, while unlisted property book

values remained unchanged.

“That’s just ludicrous,” he said.

Mr Warne concurred there was a need for more clarity around valuations and liquidity.

University of Melbourne Finance Professor Carole Comerton Ford said the decline of publicly listed companies wasn’t just a regulatory issue; it reflected the rise of private capital.

“Now there’s lots of choice, you can stay private, you can get as much capital as you need,” she said.

ASIC’s Symposium on Public and Private Markets in Sydney on Tuesday. Picture: The Australian / Monique Harmer

“Changing regulation, I don’t think is going to solve the problem.”

Barrenjoey executive chair Guy Fowler said regulation wasn’t the factor driving companies to remain private, pointing to the $24bn sale of AirTrunk and noting how the data centre provider would have been forced to list 20 years ago.

Dr Arndt said unlisted investment opportunities had to outperform public assets to justify investor interest.

“If they don’t, we shouldn’t buy them,” he said.

“It’s really about time horizons for the end investor in both markets,” Dr Arndt concluded.

Mr Longo pointed to the regulator’s announcement on Tuesday that it was launching a two year trial aimed at opening up the initial public offering market.

The ASIC chair said it showed it was “time to grease the wheel a bit”, noting companies had already reached out to the regulator on the first day of the new rules.

Liberal Senator Andrew Bragg welcomed ASIC’s plans to slash some of the regulatory burden for IPOs, warning Australia’s public markets risked becoming a “graveyard” where “new listings are almost non-existent”.

But Senator Bragg said more work was needed: “A few small process changes can’t paper over the slew of hard red tape which damages the overall listing environment. Labor added another 900 Treasury regulations in the last Parliament,” he said.

Originally published as Business leaders want ASIC to open up public markets, go easy regulating private assets