The 2025 Global Asset Owner Peer Study, conducted by Northern Trust and covering 180 institutional asset owner organisations including 40 in the APAC region across super and pension funds, endowments and foundations, family offices and others, has found that managing liquidity and risk is becoming increasingly important.
To keep up, asset owners are turning to technology and automation to improve efficiency and to make better decisions, and investing in systems to strengthen data quality, compliance and risk controls.The research also found that Australian asset owners are significantly more exposed to equities than their global counterparts, and that attraction to private markets is independent of asset-owner size.
Public equities remain the cornerstone of global asset manager portfolios, making up an average 42 per cent of holdings. Fixed income follows at 27 per cent, while private markets account for around 13 per cent, or roughly one in eight dollars.
But private markets are popular, with 86 per cent of asset owners investing in them. Two-thirds also allocate to hedge funds, absolute return strategies and other diversifiers.
Liquidity has come back into focus, with six in ten respondents saying it’s become a bigger priority over the past year. On average, cash allocations sit at 11 per cent, and half of those prioritising liquidity are holding higher cash reserves to help them manage it.
Those with larger allocations to private markets are also focused closely on managing risk. Asset owners investing 20 per cent or more into private markets are more likely to name risk management as a priority.
Technology adoption is also gathering pace. Nearly eight in ten respondents (79 per cent) are stepping up their use of tech to streamline operations, and 57 per cent say they’re increasing automation.
Looking at where the money’s going, around half (51 per cent) plan to spend more on portfolio analytics with a similar proportion (49 per cent) spending on portfolio management and compliance (48 per cent). When it comes to external support, more than one in three asset owners say enhanced risk and analytics capabilities from service providers would add the most value.
The survey found the average Australian asset owner was 55 per cent invested in equities compared to an average of 42 per cent across all asset owners in the survey, and to 38 per cent in New Zealand, 35 per cent in Hong Kong and 29 per cent in Singapore.
Northern Trust head of Australia Leon Stavrou told a media briefing that this was in part down to strong domestic equity performance over a number of years, and a move from listed to private equity.
“With the success of the ASX over a long period of time, that has resulted in higher allocations to Australian equities in particular, and you have a bit of a home country bias with that,” Stavrou said.
“But as funds get larger and larger, it’s more difficult to put more allocation into those, and particularly the domestic market. So what we might see over time in the future is more allocation to emerging markets. It’s still equities, but moving away so much from concentration in the domestic market, and then into the private market areas.
“That’s where I’m expecting and seeing the growth, and I would just say more broadly, from our client base…we are seeing growing allocation to private markets; and private market managers as well becoming more prominent; and even some of the traditional listed-equity managers looking at private-market products from a product development and distribution perspective.”
The relative over exposure to equities compared to global peers results in relative underexposures to fixed income and bonds (23 per cent versus 27 per cent), private markets (9 per cent versus 13 per cent) and absolute return, hedge funds and other diversifiers (2 per cent versus 7 per cent). Australian asset owners’ cash holdings are bang-on the global peer-group average of 11 per cent.
The survey found that almost nine out of 10 (88 per cent) asset owners in APAC invest in private market assets, the research found, slightly more than asset owners in north America (86 per cent) and ahead of asset owners in EMEA (83 per cent).
Australian asset owners get their private markets exposure primarily by investing in infrastructure, with 80 per cent of Australian asset owners who invest in private markets investing in these assets, and 70 per cent investing in commercial real estate.
By contrast, every Hong Kong asset owner that invests in private markets invests in private equity, and only around a third invest in infrastructure, commercial or residential real estate, or private credit, direct lending and private lending.
Only half (50 per cent) of Australian asset owners that invest in private markets invest in private equity, well below the global average of 67 per cent of asset owners that invest in private markets that invest in private equity.
“It is interesting that the sizes of asset owners don’t seem to be a factor in allocation to private markets,” Stavrou said.
“Despite typically having more resources to dedicate to identifying opportunities and managing risk overall, we found large organisations at 13 per cent do not allocate more to private markets compared to their small and medium counterparts, which were also at 13 per cent. This indicates to us a broad appeal of private markets to asset owners of all sizes and sophistication levels.”
The survey found that liquidity management has “become a priority for asset owners, giving them the flexibility to exit volatile positions as well as capitalise on emerging opportunities”.
Stavrou said liquidity was “a really big story in this in the survey”.
He said that at a global level “liquidity has become more important for 60 per cent of respondents in the past year, including 23 per cent who say it has become much more important”.
“Those with higher alternative asset allocations are more likely to say that liquidity has become much more important,” he said.
“I think you know the reasons for that is obvious, given the illiquid nature of some of those assets; and nearly half, at 45 per cent, of those with cash holdings also employ derivatives, which…may explain the relatively higher cash allocation due to collateral requirements to manage margin calls and mitigate counterparty risk.”
Stavrou said the research revealed that higher cash reserves are used as a strategy to manage liquidity by half (50 per cent) of respondents.
“Those with higher alternative asset allocation, as I said, were more likely to say that it was more important and just more broadly around cash allocation,” he said.
