Amid increased scrutiny on private markets, 40 per cent of Australian wealth managers believe access – or lack thereof – to private assets is a “threat” to their business, according to research.
The report, from Natixis Investment Managers and CoreData Research, found 92 per cent of wealth managers intend to increase or maintain their private credit offering and 91 per cent plan to do the same with private equity investments.
Additionally, nearly half – 48 per cent – say meeting client demand for unlisted assets will be a major factor in growth plans.
The report found local portfolios are relying on a mix of 88 per cent public assets and 12 per cent private assets, with the allocation to the latter expected to increase further.
Nearly 80 per cent of wealth managers think, despite high valuations, private assets are good value long term, and 40 per cent say they will provide a “safe haven” in a recession.
This research comes as the corporate regulator has ramped up scrutiny over private markets over the past couple of months, which have long been criticised for opaque valuations and lack of liquidity.
The regulator released a discussion paper in February on the dynamics between public and private markets, seeking feedback from the industry on the most efficient ways to regulate the sector and aiming to gather more information to be able to appropriately consider the risks.
During the ACSI Conference this week, hosted by predominately industry-fund owned proxy adviser Australian Council of Superannuation Investors, ASIC chair Joe Longo spoke on private markets and said the regulator was questioning what its role should be in regulating the sector.
“We all accept the need for good regulation, but as far as the private markets are concerned the themes that have real traction are that we need more transparency – how do we achieve that?
“Our data sources are not comprehensive and in some respects they’re behind internationally. When I think about regulation I’m not talking about rules; I’m talking about levers…but I’ve got no desire to regulate more than we have at the moment.”
Longo said he wanted to regulate in a way that would build confidence in investments across the industry.
“From a regulatory perspective, we all have an interest in orderly, fair markets, whether they’re deemed to be private or public.”
The regulator’s discussion paper came about due to a growing interest in private markets over the last year, warning it might just be a bubble.
The response to growing regulatory pressure on the sector, particularly private credit which the regulator believed had failures “on the horizon”, saw some advisers and licensees reassessing the use of the asset class in client portfolios.
Licensee Count recommended its advisers sell holdings in a minimum of three funds run by Australian private credit fund Metrics Credit Partners.
Metrics defended itself and said despite Count’s actions, it had performed well for its investors.
At the time, a Metrics spokesperson said: “private credit is growing because the asset class is meeting the needs of a large investment cohort, in particular those seeking an allocation that can provide capital stability, income and portfolio diversification”.
On Monday, ASIC commissioner Simone Constant told Professional Planner the regulator was “pleased to see” the industry was increasing its own scrutiny over private credit following the release of ASIC’s whitepaper.
“The overwhelmingly open reaction to our report from the industry shows we need to keep going,” Constant said.
“We need to be on top of this, where it is, what it looks like and you’ll hear more from us on private credit within the private markets discussion over the coming months.”
