Research validates ASIC private markets concerns

The Australian Securities and Investments Commission’s (ASIC’s) concerns about private markets appear to be justified with new research revealing 56% do not have a clear idea of how private assets work.

The research, undertaken by CoreData on behalf of Natixis Investment Managers, confirmed a significant level of interest in private asset investment opportunities but also revealed a worrying knowledge gap.

The commentary attaching to the research said that despite Australian investors wanting to capitalise on the opportunity in private markets, many don’t understand how private assets work as more than half (56%) think private assets, like listed assets are priced daily.

It said this is as 58% of investors claim to understand the difference between public and private markets, compared to 65% globally.

The findings are derived from a survey of over 7,000 individual investors globally with more than $100,000 in investible assets outside of superannuation and their homes.

It found that, currently, three in ten (31%) of Aussie respondents invest in private assets, while 54% are interested in investing in private assets but are worried about liquidity.

Commenting on the research, Natixis IM Country Head, Australia and New Zealand, Louise Watson said with increasing headlines around the opportunity in private markets, ongoing volatility in public equity markets, and the enticing frontier a newer asset class, it’s fair to expect investors want in.

“Education becomes essential as some knowledge gaps remain. Liquidity, the valuation lag, and the return cycle are the top three differences between public and private markets that investors must know,” she said.

The research also validated the view that active management may be returning to vogue.

It said that facing ongoing uncertainty, investors are turning towards active investment strategies as 68% said, ‘I don’t want to be locked into only what overall markets can deliver for returns’, and 67% want the opportunity to outperform the market.

“Diving deeper into that concern, two fifths (40%) feared that if the Magnificent Seven falter, it would have an outsized negative impact on their portfolios,” the survey analysis said.

“Aussie investors are especially sceptical on the longevity of AI. While many have ridden the market highs boosted by AI, 63% think AI is a bubble waiting to be burst and 54% think the risks far outweigh the benefits.”