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Super funds boost private market exposure by one-third since 2022
Private market assets in super have surged, while private debt recorded the fastest growth among all investment types.
Private market assets in super have reached $400 billion as of June 2024, according to Rainmaker Information’s latest Institutional Roundup Report.
The report revealed that private market assets in super have grown by 34 per cent over the two years to June 2024. This has outpaced overall super fund asset growth of 20 per cent in the same period. Back in June 2022, private assets totalled $300 billion.
Private real assets, which include unlisted property and infrastructure investments, have formed the largest portion of private market holdings, according to Rainmaker Information.
These assets amounted to $266 billion or 67 per cent of the total by June 2024. While their annual growth remained at 8 per cent, the two-year growth rose to 39 per cent.
Super funds have, on average, allocated 10.9 per cent of total investments to private real assets, though larger funds have held significantly higher allocations.
Meanwhile, private equity remained the second-largest private market holding, with total investments reaching $106 billion as of June 2024.
This asset class makes up 27 per cent of total private market assets in super. Since June 2022, private equity investments have grown by 16 per cent, although growth over the last year has eased to 5 per cent.
Super funds have, on average, allocated 4.4 per cent of their total portfolios to private equity, with little change in allocation levels over the past two years.
Australian Retirement Trust, AustralianSuper, Hostplus, and Aware Super have held the largest allocations, collectively accounting for 55 per cent of total private equity investments in super.
Private debt, while still the smallest component of private market assets in super, has been the fastest growing, with investment levels surging by 75 per cent over two years, from $15 billion in June 2022 to $27 billion in June 2024.
Private debt now comprises 7 per cent of total private market assets. However, the average super fund allocation to private debt has remained low at 1.1 per cent, despite its sharp growth.
The highest allocations have been by Hostplus at 2.8 per cent and MLC Super Fund at 2.7 per cent. Meanwhile, AustralianSuper reduced its allocation from 2.2 per cent in June 2022 to 1.5 per cent in June 2024.
This coincided with recent survey findings from Morningstar’s Voice of the Asset Owner Survey that revealed that institutional investors are being increasingly drawn towards private markets, particularly with Australian super funds.
According to Morningstar, investors are being drawn towards private markets due to the greater direct influence they offer over company operations, with the potential for fewer regulatory restrictions.
Morningstar said: “Larger funds are evolving their strategies within private markets, taking a more active approach by applying fee pressure, engaging more in direct co-investments, and focusing on parallel funds rather than broad mandates.”
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