Private market strategies like private equity, private credit, real estate, infrastructure, and venture capital have been gaining traction as more investors seek to diversify their portfolios for improved risk-adjusted returns. This trend is particularly noticeable in Australia, where superannuation funds are projected to significantly boost their investments in these areas. Specifically, over the next ten years, they’re set to increase their allocation by A$31 billion in private equity, A$41 billion in real estate, and A$36 billion in infrastructure. For investment managers eager to tap into this growing demand, it’s vital to build a solid operational framework capable of managing the scale and intricacies involved in these investments.
As firms evolve, they face several challenges, especially as they try to keep up with changing service expectations or venture into new investment structures like direct investments, co-investing, or strategic allocations through various funds. Furthermore, fund managers must decide whether to concentrate on domestic opportunities or to branch out globally, each option bringing its own set of compliance and resource allocation challenges.
The complexity of these investments means there are increasing demands on data and system management. Managers need robust data integration, cutting-edge analytics, and strong data security protocols to manage both investor and internal reporting needs effectively. Moving beyond simple spreadsheets to advanced data and platform solutions—whether developed in-house or through partnering with tech providers—is essential to ensure accuracy and system compatibility.
Moreover, equipping staff with top-notch systems is key to facilitating growth. This involves making strategic decisions about whether to handle functions internally or outsource them and conducting thorough operational due diligence. Ensuring smooth operation across the value chain, from data management to service delivery, is crucial for attaining scalable and sustainable success within Australia’s burgeoning private markets.
For more insights into managing the increasing complexity of private market strategies, you can download our "Streamlining Your Operations as Investment Complexity Increases" whitepaper.
Source: Industry Super Australia, “The Investment Opportunity in Australian Private Markets” (November 2022)
