The circa $365 billion AustralianSuper has pushed back on more stringent regulation of private markets investing, saying that it doesn’t see the private markets as being “inherently riskier” than public counterparts and that super funds are “appropriately regulated” and well-placed to understand and manage risks like opacity, illiquidity, valuations and conflicts of interest.
“We have strong processes by which we assess the risk of each private market investment, in many cases benchmarking the profile against a listed equivalent,” AustralianSuper wrote in its submission to ASIC’s review into public and private markets.
“We mitigate the risks associated with private market investments through a range of controls, including an illiquid asset limit which limits the overall allocation to these investments in the portfolio.”
ASIC commissioner Simone Constant previously told the Investment Magazine Fiduciary Investors Symposium in the NSW Blue Mountains that there is greater scope for more targeted enhancement and active and ongoing monitoring and supervision in wholesale and retail private markets, even though the regulator believes the asset class is largely meeting the needs of institutional investors.
“While there’s limited desire for increased regulation of private markets, there is an openness to increased supervision, especially when it comes to things like valuation of assets, management of conflicts of interests, management of sensitive information, meaningful and effective disclosure of fees and risks, fair treatment of different investor types, as well as further information from ASIC on what good could look like,” Constant said.
Locally, AustralianSuper invests more than $30 billion in private market assets across infrastructure, property, private credit and private equity, with assets including Sydney Airport, NSW Ports, Indara Digital Infrastructure, Moorebank Intermodal Precinct and Transurban Queensland.
But while the regulator has observed a growing preference for private markets from both investors and companies, AustralianSuper says that it hasn’t increased the portion of member funds invested in Australian private markets at the expense of public markets, with the portion of funds in the balanced option allocated to private markets actually reducing slightly over the last decade.
“We continue to have 25 per cent of our portfolio invested in Australian equities, have participated in over 300 equity raisings since 2014, providing more than $5.9 billion to Australian companies and have committed more than $2 billion to supporting emerging Australian companies through investments in venture capital funds and micro-cap companies.”
Despite its defence of its risk management, AustralianSuper’s private markets program has in the past attracted been the subject of criticism, including for the $1.1 billion write-off of US software company Pluralsight in 2024, an experience that Robert Schnittger, AustralianSuper senior portfolio manager of private equity, later described as “humbling”.
However, the fund has recovered well from other private market misadventures, including Pacific Hydro, which was sold at a premium after being written down significantly over the course of AustralianSuper’s investment in it.
Like Australian Retirement Trust – which took aim at the proliferation of evergreen funds, saying that “liquidity/duration mismatch gives rise to potential risks that investors should be aware of” – AustralianSuper suggested that regulatory focus would be better directed towards non-APRA regulated entities, particularly in private credit, where retail investors “may not fully understand the risks of leverage and illiquidity”.
“This would align reporting and regulatory requirements with those of APRA-regulated investors, ensuring retail investors are better protected from high-risk, low-liquidity investments and unclear risk profiles. Solutions could include further disclosure of risks, product intervention powers, or consideration of a sophisticated investor test.”
AustralianSuper also said that super funds were better placed to invest in private markets on behalf of their members than other intermediaries owing to the regulatory oversight under which they operate.
“The breadth and nature of risks for retail investors is contingent upon an intermediary’s ability to manage risk and deliver value on their behalf. Superannuation funds offer members cost-effective and prudentially regulated risk management. Retail investors accessing private markets outside APRA-regulated superannuation funds do not have access to the same risk management.”
While liquidity has also been a key concern for regulators as the proportion of private market assets in super fund portfolios increases, AustralianSuper said that “strong inflows and robust liquidity management” meant the risk was effectively managed, and that its access to “diverse sources of liquidity” meant that it wouldn’t be a forced seller of its private assets during periods of crisis or stress.
The fund also highlighted its industry-first appointment of a chief liquidity officer – Chandu Bhindi – and the “significant investments” it’s made in building an internal global liquidity and Treasury function to optimise management of capital flows, liquidity risk, T costs and implementation of its investment strategy.
“AustralianSuper’s capability to manage this risk was evidenced during recent market volatility which occurred simultaneous to a cyber incident. While we did not experience significant withdrawals at this time, the fund was in a strong liquidity position to have met any large unexpected withdrawals during a simultaneous event of this nature.”
