Key Takeaways
- • Mavin Advisory Group's white paper finds Australian private market managers face increased regulatory scrutiny and must upgrade operating and governance models, citing a "notable shortfall" in internal investment in operations and technology.
- • Private capital fund AUM in Australia has risen 160% over the past decade, and superannuation funds now hold over 16% of their total portfolios in private markets.
- • Unlisted real estate and infrastructure form the largest super allocation to private markets, followed by private equity, while private debt is the smallest but fastest-growing component from a low base.
- • Mavin partner Philip Hope says firms have underinvested in operations, technology and governance, and warns that greater transparency demands could erode the distinctiveness of individual firms and their deal origination.
- • The white paper argues public market experience can signal a more operationally challenging and less profitable future for private markets.
Summary
According to a new white paper from specialist investment consultancy Mavin Advisory Group, private market managers will need to lift their operating and governance standards in response to increased regulatory scrutiny. The paper describes Australia as being in a "golden age" for private markets investing, citing a 160% increase in the overall assets under management of private capital funds in Australia over the past decade.
The white paper notes that superannuation funds, the largest investor base in the Australian market, now allocate over 16% of their total portfolios to private markets, with some funds holding substantially higher proportions. Unlisted real estate and infrastructure account for the largest component of these allocations, followed by private equity. Private debt holds the smallest allocation but is the fastest-growing component of super fund private market investments, the paper said, albeit from a low base.
Despite this growth, the white paper states that "operations and technology functions remain immature" across the sector. It identifies "a notable shortfall in leveraging this Private Markets era to invest in their own internal capabilities, outside of investments and business development, and secure their long-term sustainability." It also argues that experience from public market managers should not be ignored, as it can signal a more operationally challenging and less profitable future for private markets.
Mavin Advisory Group partner Philip Hope said firms had underinvested in operations, technology and governance capabilities relative to strong growth in private market investment. He noted that investors intend to further expand their allocations, and that regulators have consequently increased scrutiny of private markets, particularly the newest entrant, private credit. Hope cautioned that while similar transparency between private and public markets may appear fair in theory, disclosing that level of detail could detract from the distinctiveness of individual firms and the deals they are able to originate.
The white paper notes that superannuation funds, the largest investor base in the Australian market, now allocate over 16% of their total portfolios to private markets, with some funds holding substantially higher proportions. Unlisted real estate and infrastructure account for the largest component of these allocations, followed by private equity. Private debt holds the smallest allocation but is the fastest-growing component of super fund private market investments, the paper said, albeit from a low base.
Despite this growth, the white paper states that "operations and technology functions remain immature" across the sector. It identifies "a notable shortfall in leveraging this Private Markets era to invest in their own internal capabilities, outside of investments and business development, and secure their long-term sustainability." It also argues that experience from public market managers should not be ignored, as it can signal a more operationally challenging and less profitable future for private markets.
Mavin Advisory Group partner Philip Hope said firms had underinvested in operations, technology and governance capabilities relative to strong growth in private market investment. He noted that investors intend to further expand their allocations, and that regulators have consequently increased scrutiny of private markets, particularly the newest entrant, private credit. Hope cautioned that while similar transparency between private and public markets may appear fair in theory, disclosing that level of detail could detract from the distinctiveness of individual firms and the deals they are able to originate.
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