Australian institutional investors, particularly superannuation funds, have planned to maintain their exposure to US markets in 2026 while increasing their focus on private assets, according to Natixis IM’s 2026 Institutional Investor Outlook.
Natixis IM, together with CoreData research, surveyed 515 institutional investors managing US$29.9 trillion globally across public and private pensions, including superannuation funds, insurers, foundations, endowments, central banks and sovereign wealth funds.
The survey indicated that expectations of heightened market volatility are widespread, with 63 per cent forecasting more turbulence in equities, 40 per cent in bonds and 67 per cent in currency.
Despite this, investors have shown growing interest in private markets, with 63 per cent assessing new opportunities in the sector.
Four in five respondents acknowledged that private markets offer stronger return potential than public markets, leading 37 per cent to lift target allocations for 2026.
Louise Watson, Country Head of Australia and New Zealand at Natixis IM, said: “Markets around the world have proved remarkably resilient in 2025, with most equity indices posting a third consecutive year of double-digit returns during a period marked by tariffs, geopolitical conflicts and supply chain shocks.”
She added that long-term investors “are feeling optimistic about what’s to come in 2026 and beyond”, highlighting the “enticing opportunity in private markets” for returns, diversification and risk management.
Watson also noted shifts in public market sentiment: “While we’re starting to see some speculative premium in public market valuations leak out of the widely touted AI bubble, we still expect AI to drive productivity improvements across private markets and especially middle market companies.”
She added that Natixis IM sees a low probability of a near-term US recession as firms adopt AI to improve customer growth, retention and margins.
The outlook revealed strong conviction in alternative assets, with 83 per cent expecting a 60:20:20 alternatives-diversified portfolio to outperform the traditional 60:40 structure in 2026.
Respondents were especially positive on private equity (63 per cent), private debt (50 per cent) and residential real estate (57 per cent), while 73 per cent saw attractive potential in private equity secondaries.
Long-term interest in private markets also remained firm, with 40 per cent planning to raise allocations over the next 10–15 years. A further 87 per cent anticipated that eased regulation around private market access would encourage companies to remain private for longer.
Moreover, tariffs continued to weigh on sentiment, with 90 per cent expecting the global tariff environment to stay unpredictable through 2026. Political instability was also a major concern, with 73 per cent viewing it as an escalating threat to market stability.
Most respondents did not expect manufacturing to return to the US “in a meaningful way” regardless of tariff duration.
Instead, 47 per cent believed heightened US–China tensions could create favourable conditions for emerging markets.
More than half now think India will surpass China as the leading emerging market, and 83 per cent said easing monetary policy in advanced economies would support growth.
AI played a dual role in the outlook, offering both opportunity and risk. For the first time in five years, the tech bubble (47 per cent) overtook geopolitics as the top concern for 2026.
Australian respondents expressed stronger bubble fears than the global cohort, with 83 per cent believing AI is a bubble compared with 46 per cent globally.
While 77 per cent expected the S&P to end 2025 at a record high, nearly half predicted the AI bubble would burst in 2026.
Almost nine in ten Australian investors agreed markets were due for a correction, with 47 per cent expecting a 10–20 per cent decline and 21 per cent forecasting a correction above 20 per cent.
