Aussie insto investors ‘seeking the niche’ in private markets

Private markets are set for a significant injection over the next five years as Australian institutional investors look to ‘seek out new niche opportunities’ in the face of market uncertainty, according to the latest research from Nuveen.

The fifth-annual Equilibrium Global Institutional Investor Survey indicated that 75 per cent of Australian institutional investors planned to expand their allocations to private markets over the next five years, compared to just 66 per cent of their global counterparts.

Similarly, 59 per cent of Australian investors responded that they were actively increasing their private credit allocations in “niche” opportunities, such as NAV lending, esoteric asset-backed securities (music royalties, diamond receivables, litigation finance, airplane leasing) and energy infrastructure credit. Only 47 per cent of global institutional investors suggested they were doing the same.

“Private credit opportunities remain strong globally, with a significant amount of both institutional and private wealth investors continuing to look offshore to complement their existing Australian private credit allocations,” Andrew Kleinig, Head of Australia at Nuveen, said.

“According to Nuveen’s survey, niche private credit opportunities are also gaining momentum among Australian investors in areas such as energy infrastructure credit and fund finance, showing greater demand in areas outside traditional private credit sectors.

“We are seeing strong interest from family offices, private wealth and high-net-worth individuals for private markets solutions as they seek solutions targeting diversification, low volatility, and strong and stable income.”

Over the next two years, global investors said they are planning to mostly increase their allocations in private infrastructure (50 per cent), private credit and private equity (both 49 per cent). Australian investors closely matched these preferences, with private infrastructure and private equity in the joint first to have their allocations increased, followed by private credit.

The research also indicated that Australian investors seemed to have a more confident and “risk-on” approach, with 69 per cent planning to increase their equity exposure (compared to 54 per cent of global investors) and only 12 per cent intending to decrease it (compared to 17 per cent globally).

“Nuveen, via our private credit specialists Churchill and Arcmont and rich heritage in broader private markets investment, has the scale and proven track record to provide what investors need across the breadth of the distribution spectrum,” Kleinig said.

“At Nuveen, we’re focused on providing Australian investors with increased access to the benefits of private capital in local and overseas markets, through the launch of Nuveen’s various strategies including the CRE Debt Fund and Nuveen Churchill Private Credit Income Fund, giving investors an attractive opportunity to diversify portfolios whilst looking to achieve stable returns.”