“I get concerned around the linking of Metrics with the idea that a sector is under scrutiny,” Lockhart told InvestorDaily.
“We operate in a market where we’re transparent and happy for people to scrutinise our funds, our performance. All I ask is that people compare based on fact.”
Metrics, Australia’s $22 billion non-bank lender, has come under the spotlight following ASIC’s recent paper on private markets, and Count Financial subsequently recommending its advisers exit three of the manager’s funds.
However, Lockhart insists that Metrics’ performance and governance standards speak for themselves.
“If you look at Metrics’ funds over a 12-year period, we've never had a negative month … and we've been a proactive manager of our investors’ capital to protect and preserve their position,” he said.
“If Metrics is seen as the largest and most prominent manager, maybe the question ought to be: Why is that? Is it because we’ve delivered strong returns, managed risk consistently, adhered to high corporate governance standards? We're transparent with our investors, we don't have any conflicts of interest, and we're subjected to independent oversight and review of our funds.
“We certainly operate under the highest governance standards globally.”
The ASIC paper highlighted concerns around opacity, conflicts of interest, valuation, liquidity, and governance in private markets more broadly, but much of the focus has been put on private credit - which the corporate regulator last month said could be the source of the next financial crisis.
However, Lockhart is firm in his belief that Metrics meets or exceeds the regulator’s expectations.
“I don't believe there is any aspect in any of Metrics funds or in our business where we're falling short of any of the ASIC requirements. I think we've gone beyond, over and above that.”
He emphasised that the firm fully complies with ASX listing rules - managing three listed funds - with independent responsible entities and trustees, such as regulated entities Perpetual and EQT, overseeing the funds' performance and investment policies.
Additionally, the firm is prudentially regulated, holds an AFS licence, and is subject to monthly independent reviews, including tests for valuations and impairments, along with half-year and annual audits by KPMG.
“You've got multiple independent parties that are reviewing and confirming our performance,” he said.
As a result, Lockhart is confident that Metrics' commitment to rigorous compliance and transparency sets the firm apart from less transparent players in the market.
“I think what ASIC is really looking at is a situation where you've got a manager in private markets with their own internal trustee raising money from wholesale investors,” he said.
“That’s a very different structure from what we have in place … We've tried to separate the way Metrics does things from other parties or other firms.”
Lockhart emphasised that Metrics' commitment to transparency was the key reason the firm was “very pleased” to offer additional reporting - not just on performance, but also on risk settings.
ASIC in February advised that it is undertaking work to examine private credit and risks for retail investors more closely.
“This includes a thematic surveillance of retail private credit-focused funds, reviewing governance and practices relating to disclosure, distribution, conflicts, valuation and credit risk management,” it said.
Regarding the regulator's increased focus on private credit, the CEO said he believes that ASIC’s scrutiny is a natural part of the regulatory process but stressed it should not be used to unfairly cast doubt on the practices of firms like Metrics.
“Everyone's subject to scrutiny, and then the question should be, is the person prepared to be held accountable and be transparent?” Lockhart said.
“I think on all aspects of our business, be it investment, risk management, transparency, governance, I genuinely think that we are doing very, very well for our investors, and we’re not only compliant with the obligations under law, but doing more than that.”
Broad market with multiple objectives
He also raised concerns about the misperception of private credit, emphasising that it’s a versatile asset class - serving as both a defensive alternative to traditional fixed income and a source of higher returns through more complex debt structures.
“Not all private credit is the same. Not all managers are the same,” he said.
“At one end of the spectrum, private credit can be an alternative to traditional fixed income - it can be defensive, capital stable, and structured with strong covenants to protect investor capital.
“At the other end, it can function as an equity market replacement, where investors take on mezzanine or subordinated debt, or structures with equity optionality.”
Metrics, he said, operates across the entire risk spectrum, from senior investment grade unsecured debt to investment grade companies, all the way through to equity in the capital structure.
“What we've done is we've sought to segment risk, return and liquidity features in different products, and then those investments are allocated to the respective funds,” Lockhart explained.
“One of the concerns I have is people that lure an investor by the promise of high returns and don't fully disclose the risks that are required to be taken. And again, I think that's really what ASIC is looking at.”
Other areas of misrepresentation, he said, include the misconception that actions like appointing receivers signal higher risk, when in fact, these measures are essential to protect investor capital.
“The appointment of a receiver or going through a debt for equity swap are actual tools that are available to a manager in private credit to protect and preserve investor capital,” Lockhart explained.
Failing to act, he argued, would be of great concern.
“If a manager doesn’t take that proactive step, then that would be of concern,” Lockhart said. “That’s what we do as an active manager - we manage risk. That’s our role.”
Ultimately, he said, the broader discussion on ASIC’s report needs more nuance.
“The focus should be on facts,” he reiterated. “There's no point criticising Metrics for its success.
“As the largest private credit provider in the Australian market, we are looking to raise the standard. We're looking to continue to improve.”
