Super fund appetite for private assets intensifies

The demand from superannuation funds for private assets has picked up in the last two years according to new research from Rainmaker Information, despite growing concerns over burgeoning interest from retail investors in the space.

Rainmaker Information’s Institutional Roundup Report found that super funds’ allocations in private assets grew by 34 per cent in the two years to June 2024, compared to the overall asset growth stalling at 20 per cent. This accounted for a $100 billion rise in the value of private assets in super, ending the 2023-2024 financial year worth $400 billion.

The research confirmed super funds held the most in private real assets which mostly consists unlisted investments in property and infrastructure, amounting to $266 billion or 67 per cent of total private market assets as of 30 June last year. Private real assets also recorded two-year growth of 39 per cent, with the average allocation of super funds sitting at 10.9 per cent.

The report said private debt was the “smallest yet fastest growing component of private market assets in super”, seeing a 75 per cent jump in the two years to June 2024 to $27 billion despite only accounting for seven per cent of total private market assets held by super funds.

Hostplus had the highest allocation in private debt at 2.8 per cent, followed by MLC at 2.7 per cent; this comes as AustralianSuper actually lowered its allocation from 2.2 per cent in June 2022 to 1.5 per cent in June 2024.

Australian Retirement Trust, AustralianSuper, Hostplus and Aware Super also hold a combined 55 per cent of total private equity assets, despite the total industry average sitting at 4.4 per cent as of June 2024. This still makes private equity the second-largest private market asset favoured by super funds (27 per cent of total private market assets in super), with a total of $106 billion invested according to data from the Australian Prudential Regulation Authority (APRA).

The report also said super fund interest in private equity has remained relatively stable, jumping by 16 per cent in the last two years but only five per cent since June 2023.