The massively increased involvement of Australia’s $4 trillion superannuation industry in private markets is one of the key factors to an Australian Securities and Investments Commission review of regulatory settings for private assets.
ASIC chair Joe Longo told media in an invitation-only briefing on Tuesday that the regulation of private markets “affects us all, not just the institutional investors and funds that immediately come to mind, but everyone”, including, increasingly, superannuation fund members.
In a discussion paper released on Wednesday, ASIC said it had reached the preliminary view that it will focus on the key risks of “opacity, conflicts, valuation uncertainty, illiquidity and leverage in private markets”.
The paper said the estimated global value of private capital funds was US$14.6 trillion ($21.9 trillion) in June 2024, a threefold increase on a decade earlier, and that APRA-regulated superannuation funds are significant contributors to private market growth.
It said APRA data indicates super funds allocate up to 38 per cent of their assets invested in private assets, and for the two largest funds – AustralianSuper and Australian Retirement Trust – the figure is about 22 per cent.
The sheer weight of money and the unabated growth of super funds is having direct and demonstrable impact on the dynamics of public-versus-private markets.
Longo said it was too early to tell whether the swing towards private markets is structural or cyclical; but in any case, “this is about the future of Australia’s economic growth,” he said.
“I would say this is the most important piece of proactive work ASIC has undertaken in my time as chair,” Longo said.
“The preliminary views we articulated in this paper will prompt input and insights we will share later this year, and that will inform our priorities and work program.”
A shift towards private assets away from public markets is not a uniquely Australian phenomenon, but ASIC Commissioner Simone Constant told the briefing “at least one key element means the story could unfold differently here than elsewhere, and that is our superannuation sector”.
Constant said the value of superannuation has increased 188 per cent in a decade, it is one of the five largest pools of retirement assets in the world even though Australia represents just 1 per cent of the global population, and recent estimates – in research commissioned by Super Members Council and research bythe Thinking Ahead Institute – suggest it could be on-track to be the second-largest pool by 2030 or 2035.
“Naturally, a key focus for ASIC will be understanding how Australia’s $4 trillion super industry is influencing market dynamics,” Constant said.
“The presence of superannuation in this story means that every worker in Australia is impacted by the evolution of Australia’s capital markets.”
Constant said ASIC’s work would focus on how super funds can “continue to invest in Australia’s growth, whilst ensuring that Australian super balances are being protected in the more opaque private market investments without the benefit of some of the tools of the listed market”.
She said it would examine how ASIC can “along with our peer regulators, ensure confidence that super funds are holding and valuing their private market assets in the best interests of members”.
The ASIC discussion paper noted that public markets “provide important public goods with price discovery and liquidity, facilitating efficient valuation, pricing and capital allocation for public and private markets and the wider economy”.
“A weakening of public markets would diminish this public good,” it said.
By contrast, private markets pose particular challenges for market confidence.
“For instance, a lack of transparency can lead to mistrust about the valuations of private assets,” the paper said.
“Valuations are mostly based on methodologies and judgements rather than publicly available trading prices and may not always be independent. This affects both investor decision-making and the system as a whole. Relying on expertise and commercial data providers does not fully address this concern.”
