A broadening of retail investors’ access to private asset investments—often described as “democratization”—has been a notable trend globally over the past few years. This trend is driven by investors’ increasing demands for diversification opportunities and higher yields beyond the traditional public markets, as many seek exposures that are ostensibly less correlated with listed equities and bonds and that can add differentiated sources of returns to portfolios. Globally, new semiliquid structures are opening private markets to a wider investor base, such as interval funds in the US, longterm asset funds in the UK, and European long-term investment funds in the EU. Additionally, regulators in Singapore and Hong Kong are working on regulatory reforms to broaden retail investors’ access to private markets.

Australia has also experienced increased investor interest in private asset classes, especially private credit. This reflects both the search for income and investors’ appetite to consider differentiated sources of return that complement traditional fixed income and equity allocations. According to the Australian Securities and Investments Commission, over the 10 years to 2024, the total value of the Australian public equity and debt markets doubled. In contrast, the value of private capital funds grew by an impressive 161%, comfortably outpacing the growth in public market assets.

Australian public and private market growth

In this paper, we examine the benefits and risks of investing in private markets amid growing investor interest. We also assess the role of private assets in modern portfolio construction, focusing on unlisted infrastructure, currently the largest private‑asset allocation in the superannuation sector, and private credit, the smallest but fastest-growing segment of super funds’ private-asset allocations.

Key Takeaways

  • Private assets can play an important role in portfolios by offering diversification, additional sources of alpha, inflation hedging, and protection from rising interest rates.
  • However, they also bring important risks and challenges, including liquidity and valuation risks, complexity, leverage, and higher fees and costs.
  • Rigorous due diligence is essential, especially because private asset products are complex and the underlying data is less accessible.
  • Superannuation can be a practical entry point for retail investors, because many super funds maintain material exposure to private assets, often supported by governance and institutional capabilities that individuals cannot easily replicate.
  • Super funds have structural advantages in private markets, including long investment horizons, steady inflows that support liquidity management, specialist expertise, stronger valuation governance, better transparency through prudential reporting, and greater bargaining power on fees and alignment.
  • Regulators are intensifying their scrutiny of private markets, particularly in relation to governance, valuations, liquidity management, disclosure, and conflicts, raising the bar for trustees and product providers as the sector expands.
  • Overall, the net benefits from having private assets in a portfolio depend on structure and sizing. Exposures to private assets should be appropriately sized in a portfolio according to their potential returns and risks, liquidity, and the correlation with other asset classes. When thoughtfully integrated, private assets can enhance risk-adjusted returns and improve the resilience of long-term portfolios across different market conditions.

The strategic role and benefits of private assets

Recent elevated inflation has seen a higher correlation between equity and fixed income, eroding the diversification benefits of the traditional 60/40 portfolio and prompting investors to broaden their investment menu, including private assets, commodities, and other alternative strategies. Advocates for private-asset exposure note several portfolio benefits.

Diversification and return enhancement

It’s been argued that private assets can provide alternative sources of returns with differentiated risk/return characteristics, which in turn can increase portfolio diversification, enhance return stability, and reduce overall portfolio risk through market cycles.

Inflation hedging

In our report “How Private Assets Are Transforming Capital Markets and Super,” we highlighted the benefits of unlisted infrastructure and property investments in providing inflation-linked cash flows. Unlisted infrastructure assets, such as airports, often have revenues linked to inflation, providing a natural hedge against inflation. This is particularly beneficial for super funds with real-return performance objectives that aim to preserve and grow the purchasing power of their members’ savings.

Protection from rising interest rates

Private credit has gained significant traction over the past 15 years, driven by market conditions such as low interest rates and investor demand, particularly for its floating-rate exposure when bond yields were at low levels. Private credit offers appealing returns and the benefit of initial protection from rising interest rates, thanks to its typically floating-rate exposure.

Access to growth and innovation

Private equity funds give investors exposure to private companies, which tend to stay private longer, which means much of their growth happens before they hit the public market. In our report “Should Investors Access Private Equity Through Semiliquid Funds?” we highlighted that private equity funds are providing more investors access to high-growth private companies in artificial intelligence, cybersecurity, automation, and blockchain, a space previously reserved predominantly for institutional investors.

Challenges and risks

Private market investments attract a different risk profile than public market investments. While the opportunities in private assets are vast, they come with challenges and risks that investors must consider carefully.

Illiquidity

One of the most notable drawbacks of private assets is their low liquidity. Unlike publicly listed assets or traditional managed funds, private market investments cannot be sold quickly to meet an investor’s liquidity needs, making them less suitable for those prioritizing liquidity in their portfolios.

Complexity and transparency

It is not uncommon for private market funds to have complicated structures or low transparency. They typically do not provide detailed information about their holdings, primarily due to client confidentiality and commercial sensitivity. As a result, it is harder for investors to fully assess risks and returns.

Against this backdrop, including private assets in a portfolio can add meaningful complexity to portfolio construction and risk management, necessitating advanced expertise and specialized capabilities in both areas.

Valuation uncertainty

Unlisted assets are subject to heightened valuation risks due to infrequent trading and limited opportunities for price discovery. As a result, unlisted asset valuation often relies on models and discretionary assumptions rather than observable market prices. To mitigate these risks, unlisted assets require robust, independent valuation processes; inaccurate or inconsistent valuations can mislead investors and distort performance metrics.

Manager skill is key

Success in private assets relies heavily on the expertise of investment managers. Specialist skills are needed to generate excess returns, especially after accounting for fees.

Higher fees and costs

Private market investments typically attract higher management fees than their public market counterparts. This creates a high hurdle and makes it critical to select skilled external managers who can deliver net-of-fee returns commensurate with the risks inherent in private assets.

Conflicts and principal-agent risk

In private markets, conflicts and principal–agent risk are heightened by the high reliance on specialist managers and pronounced asymmetries of information between investors and managers. Private market structures are often complex, and the roles of investment managers, fund operators, portfolio companies and affiliated service providers may overlap, increasing the potential for conflicts of interest.

To address these elevated risks, effective conflict management frameworks are essential to uphold the integrity and fairness of private‑market transactions, including robust management of conflicts of interest (e.g., misaligned incentives, related‑party transactions, and the treatment of confidential information).

Due diligence is key

Given the assorted benefits and risks of investing in private assets, investors would naturally ask: How should they go about investing in these asset classes? One way retail investors can access private markets is through conventional managed funds. As public and private markets are converging, asset managers are selling increasingly complex investment funds to retail investors, making product selection and due diligence more important than ever. In our research article, “Semiliquid Funds in APAC: Access, Liquidity and Potential Trade-Offs,” we examined how semiliquid vehicles operate across key Asia Pacific markets and outlined how product design and transparency can influence investor outcomes.

However, super funds warrant consideration as another avenue. Australians have considerable choice to access a broad suite of public and private market investments. Some super funds offer broad choice through super platforms, which provide members substantially more investment options than non‑platform super funds, typically hundreds of investment options spanning both listed and private assets. However, recent failures in illiquid, private asset products offered through some super platforms have exposed weaknesses in trustee governance. These events have highlighted the need for effective governance and research.

We also highlight the importance of access to reliable data on private markets to accurately assess risk. Thorough research and due diligence form the foundation for successful private assets investing. However, selecting the right fund can be challenging given the complexity, limited transparency, and high fees. The Morningstar Medalist Rating for semiliquid funds, which has been designed to address the unique features of private‑asset funds, can help investors perform their due diligence on these offerings more effectively.

As a case study, in our report “Private Credit and Its Role for Investors,” we highlighted key factors to consider when conducting due diligence on private credit funds. The focus should be on the investment manager, the investment process, and transparency.

Parent and People considerations include the manager’s ability to source deals, sector knowledge, commercial/legal/regulatory resources, the caliber of the investment committee, the quality of due diligence resources, and team incentive structures.

  • Process considerations include asset and sector allocation methods, diversification and risk, liquidity, redemption terms, valuation practices, credit analysis depth, protective structuring, and fee structures at both loan and fund levels.
  • On transparency, investors should verify that the fund discloses sufficient details about its underlying holdings and decision‑making processes to better assess the risks inherent in the fund.

Superannuation as an entry point for accessing private markets

Australians already hold private markets assets, mainly unlisted infrastructure and property, private equity, and private credit, indirectly through investments in super funds, mainly through default MySuper funds and choice multisector funds. Super funds may be the safest and most effective vehicle for retail investors to access private markets investments, especially for those who do not have the capacity to do their own research and due diligence for what are complex asset classes. Super funds are Australia’s mega investors, and for them, investment in private assets is a well‑established diversification strategy.

Overall, the super sector’s allocation to unlisted assets averaged about 16.5% as of June 2025. Since June 2022, allocations have stabilized at an average of about 16% to 18% across the sector.5 Industry funds continue to maintain a materially higher allocation to unlisted assets than their retail fund counterparts. Some of the largest industry funds hold between 15% and 30% of their portfolios in unlisted assets. Exhibit 2 shows the sector‑wide percentage allocation across unlisted classes as of June 2025, compared to June 2022. Over the three years to June 30, 2025, the infrastructure allocation significantly increased, while private debt continued to gain traction and was the fastest‑growing segment. On the other hand, allocations to private equity and property fell in percentage terms, although the allocation to private equity has increased in dollar terms.

unlisted asset class allocation

This is a prominent example of how super funds play to their strengths. Not only do super funds have long investment horizons, but many funds have positive, consistent member inflows, which better enable allocations to less liquid assets while still being able to effectively manage liquidity risk. For example, infrastructure assets provide essential‑services cash flows that are predictable and usually inflation‑linked. Their midrisk profile, typically between bonds and equities, makes them attractive to long‑term investors and to investors aiming to reduce portfolio volatility.

Unlisted property and infrastructure have long been a staple of super funds, particularly industry funds, as they have historically had a stable membership base providing a steady, predictable stream of cash inflows. This, in turn, facilitates allocations to less liquid assets without compromising liquidity risk for members reaching retirement or otherwise exiting the fund.

On the other hand, private debt is the smallest of the four main segments, but also fast‑growing. It is an evolving, opportunity‑rich sector with great potential to provide attractive returns, portfolio diversification benefits, and some inflation protection. However, investors must weigh these benefits against the challenges of liquidity constraints, borrower default risk, valuation risks, and transparency issues.

Benefits of accessing private assets through super funds

There are apparent benefits to accessing private assets via super funds, especially considering the challenges and risks for investors.

Governance

Australia’s superannuation system operates under a relatively developed dual regulator model. Australian Prudential Regulation Authority oversees prudential matters, requiring trustees to manage funds prudently, act in members’ best interests, and deliver quality outcomes, while ASIC regulates trustee conduct, ensuring trustees meet disclosure and member services-related obligations and standards.

Super funds are required by APRA to have robust investment governance frameworks to adequately manage private market risks.

Liquidity risk and management

The scale and long‑term horizon of superannuation capital align well with the illiquidity and longer, irregular investment cycles of private assets. Steady contribution inflows create a durable liquidity buffer, enabling funds to commit to private assets while prudently managing liquidity needs, giving members (retail investors) exposure to the potential illiquidity premium.

Members should also be cognizant of the impact of private assets on their fund’s liquidity profile; high exposure to these typically illiquid assets may increase liquidity risk in stressed markets or suddenchanges in permitted member access to funds (for example, during the covid-19 pandemic in 2020).

Ability to handle complexity and transparency

Compared to retail investors, super funds generally have deeper investment expertise and have access to specialized portfolio construction and risk management systems and capabilities. This enables them to effectively manage the added complexity of private assets.

Super funds operate under a standardized data collection and regular reporting regime, as they are required to provide investment-related data, information, and reporting to APRA in relation to private market investments through various reporting standards. There is a material difference in transparency and information availability between super funds and retail investors.

Valuation risk management

Under APRA’s Prudential Standard SPS 530 Investment Governance, super trustees must maintain a robust investment governance framework encompassing comprehensive due diligence, valuation governance, and liquidity risk management. APRA’s supervisory oversight reinforces this framework, ensuring private assets risks are managed while potential benefits are captured.

APRA-regulated super funds should possess deeper investment expertise and dedicated risk/valuation capabilities than retail investors, enabling rigorous investment selection, monitoring, and valuation processes under heightened transparency and APRA supervisory oversight.

Access to specialist skills

The larger super funds typically have internal investment teams, including private markets experts. They also have unique access to private market investment expertise by partnering with specialist external managers and/or specialist consultants to access private markets expertise and gain exposure to newer areas of private markets. These specialists are usually not directly accessible by retail investors, and they are effectively conducting the due diligence on behalf of fund members.

Institutional advantages in negotiating fees and aligning incentives

Private market investments require active management and access to specialist investment expertise, which typically attracts higher fees. Super funds can leverage their scale to engage top-tier managers and negotiate fees, helping to optimize net returns. This is a key difference from retail investors.

When investing in private assets, super funds can leverage their institutional scale and expertise to negotiate co-investment allocations on reduced- or zero-fee terms (often referred to as “no fee, no carry”), which is a vital mechanism for lowering the overall cost of their private investment portfolios. By contrast, the average retail investor typically accesses private assets through third-party vehicles that charge management fees and performance-based carry.

Well-structured incentives are critical to aligning manager and investor interests and mitigating principal-agent risk, so both parties are focused on long-term outcomes rather than short-term outcomes. Performance and incentive fee structures in private markets can be complex. Super funds usually have dedicated teams to negotiate terms, model scenarios, and quantify fee impacts under different outcomes, while retail investors generally lack equivalent resources. While ASIC Regulatory Guide 97 disclosures provide an indicative view of fees, including performance fees, they are primarily retrospective, typically reflecting a five-year look back, and may not appropriately quantify future potential fees.

Expertise in managing principal-agent risk

Super fund trustees are legally required to act in members’ best financial interests and must follow stringent APRA standards in areas such as operational risk management, service provider oversight, and business continuity planning.

Case studies

Sydney Airport taken private

We have previously highlighted in this report, “How Private Assets Are Transforming Capital Markets and Super,” an example of how large super funds can leverage their scale to capture stakes in highly valuable infrastructure assets for the benefit of their members.

Major city airports such as Sydney Airport are compelling long‑term investments for super funds because they are essential infrastructure assets that can typically deliver resilient, stable cash flows and often function as local monopolies within their geographical areas. Their income streams are usually linked to inflation, which provides a natural hedge and aligns well with real‑return objectives aimed at preserving and growing members’ purchasing power over time. Holding these assets through an unlisted vehicle further enhances the proposition: It reduces mark‑to‑market volatility versus listed markets, supports multidecade ownership that harnesses compounding returns without the frictions of frequent trading, and affords super funds greater control and influence over strategic decisions, governance, and operational management.

Taken together, the strategic importance of airports and the structural advantages of unlisted ownership make them a strong fit for superannuation portfolios seeking stable and inflation‑linked returns for members.

Shrinking listed infrastructure

In our report “Listed Infrastructure: Thinking Outside the Qube,” an issue for investors to consider is that, domestically, the number of infrastructure or infrastructure-like securities listed on the Australian Stock Exchange is shrinking. A steady run of consolidation and privatization has thinned the local listed infrastructure universe. Between 2021 and 2022, three major ASX-listed infrastructure names: Spark Infrastructure, AusNet Services, and Sydney Airport, were taken private and delisted, removing about A$40 billion of listed infrastructure from the listed market.

More recently, in February 2026, Qube Holdings (ASX:QUB) agreed to be acquired by a Macquarie Asset Management-led consortium, valuing the company at an enterprise value of about A$11.7 billion. Qube is Australia’s leading integrated provider of import and export logistics. Once the transaction is completed, it will represent another major listed infrastructure business exiting the public market, reducing the opportunity set for investors seeking exposure to infrastructure assets via listed vehicles.

Going against private

There is a strong appetite among large super funds to invest in private assets. We have seen super funds leverage their scale and participate in taking major infrastructure assets private, for example, Sydney Airport in 2022. On the other hand, we have also seen cases where a major super fund leveraged its scale and expertise to defend against attempts to take publicly listed assets private where it believed they were mispriced.

In 2023, the Brookfield and EIG consortium sought to take Origin Energy (ASX:ORG), an ASX-listed company, private via a scheme of arrangement, offering around A$9.43 per share. AustralianSuper had a significant stake at that time, reportedly holding 17%. AustralianSuper stated that it is a long-term shareholder in Origin and that the fund’s investment process is built around determining the long-term intrinsic value of the companies it invests in on behalf of members. The fund publicly opposed the bid on valuation and strategic grounds, believing the bid was substantially below long-term intrinsic value.

In December 2023, only 68.9% of shareholders voted in favor, versus the required 75.0%, so the takeover failed and Origin stayed listed on the ASX. Ultimately, AustralianSuper members benefited from the failed takeover bid, as subsequent trading indicates Origin was undervalued at the time. By May 2026, the share price was around A$11.60, more than 23% above the final implied offer of A$9.43 per share.

Regulatory lens

As private markets grow, ASIC and APRA have been increasing their supervision in this space. They are focusing on key areas such as governance, valuation practices, liquidity, conflicts of interest, and investor treatment.

ASIC is increasing its focus on private credit, given that it is a fast-growing segment globally and locally. Its recent Reports 814 and 820 evaluate local market practices, detail the outcomes of the regulator’s surveillance of local private credit funds, and offer better-practice expectations for the sector.

On a positive note for super funds, ASIC Report 814 highlights that sophisticated, prudentially-regulated institutional investors, such as very large super funds and insurance companies, typically invest via funds with transparent fees and valuations, or bespoke terms they are equipped to understand, and ASIC’s review indicates this institutional segment of the private credit market is operating in line with good practice. Overall, a positive endorsement for investors who prefer to get their exposure to private credit via super funds.

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