Australian institutional investors are trailing behind regional counterparts when it comes to private market investments, despite the broader APAC region leading the charge globally.
This is according to Northern Trust’s Asset Owners in Focus: Global Asset Owner Peers Study 2025 survey, which found that 88 per cent of asset owners in the APAC are invested in private markets – a slim lead on North America’s 86 per cent and EMEA’s 83 per cent.
Expanding on this trend, approximately 9 per cent of Australia’s institutional investors’ assets under management (AUM) are allocated to private market investments – trailing Hong Kong (11 per cent), New Zealand (14 per cent), and Singapore (17 per cent).
Australia, however, shows a clear preference for infrastructure, with 80 per cent of institutional investors allocating funds to the asset class – well ahead of Singapore’s 50 per cent. Both countries also lead the region in commercial real estate exposure, with 70 per cent of investors invested in the sector.
Moreover, around half of Australian investors who are currently invested in private markets are gaining exposure via private equity, while less are invested in residential real estate (40 per cent) and private credit (30 per cent).
Instead, local investors continue to favour public equities, the report showed.
While public equities account for around 42 per cent of asset owners’ portfolios globally, the figure climbs to 55 per cent among Australian investors, highlighting the country’s strong appetite for the asset class.
Regarding the broader APAC region, Australia maintains a lead on New Zealand, which came second with an allocation of 38 per cent to listed equities.
Nonetheless, asset owners both in Australia and globally continue to prioritise diversification, with private markets playing a growing role in portfolio construction.
“Most recognise that a strategy of maintaining a healthy exposure to alternative asset classes – both in pursuit of growth and to manage concentration risks – is essential in today’s volatile market landscape,” Northern Trust’s latest report reads.
“Private markets have seen a surge of interest in the past decade, driven by investors’ pursuit of higher returns in a low-yield environment, as well as a greater need for diversification. The
long-term nature of many of these investments fits well with large asset owners’ time horizons and objectives.”
But this continual shift towards alternative assets, as flagged by the report, introduces new complexities, both in terms of investments and operations.
In Australia, 40 per cent of institutional investors said liquidity has become more important, matching sentiment in New Zealand but falling behind the 63 per cent of institutional investors across the Asia-Pacific region who reported rising concern over liquidity.
Additionally, Australian respondents cited the “interest rate environment” and the pursuit of “higher returns” as key factors driving the increasing importance of liquidity.
Interestingly, Australia diverged from the rest of the region as the majority (90 per cent) of local respondents viewed liquidity risk as a top risk metric, compared to 40 per cent or less for other key APAC economies.
This was followed by compliance risk (50 per cent) and regulatory risk (40 per cent).
