Analysis

Institutional investors love private equity but it’s bringing them down. They’re sweating everything from valuations to overcrowding and “private equity bubble risk”.

Much of the work Willis Towers Watson does for Australia’s largest allocators is now around investment governance. But the tyranny of distance means the local scene can be a bit of an “echo chamber”.

The Future Fund pulled some of its new portfolio levers to mitigate the financial damage seen through 2022, but it doesn’t expect markets to get much better anytime soon.

While there’s widespread suspicion that “financial skullduggery” is afoot in private market valuations, the tricky part is the lack of comparisons in their fastest growing segment.

The market view is still too optimistic, according to the BlackRock Investment Institute, and investors aren’t truly considering the risk of a recession.

Inflation-linked income and capital protection are the top reasons for institutional interest in real assets, while APAC and European institutions are leading the way on ESG.

It was non-traditional diversification that saved the top performing super funds in the “torrid” year of 2022, with Chant West’s top 10 funds mostly pursuing larger allocations to infrastructure and private equity.

There’s no end in sight for super fund consolidation, and even top performing funds are merging in an effort to keep up. But what gets lost in the debate is what members think of it all.

After a rollercoaster start to the 2020s, black, white and grey swans now flit through the mind of every money manager. BCA Research has identified five such swans that could shape markets in 2023.

With a shrinking member base, Local Government Super was facing small fund purgatory. A facelift changed its fortunes.

Big super funds are getting even bigger. But as consolidation continues – and stapling kicks in – they’ve got a new problem that can’t easily be overcome: they’re more alike than different.

Custodial news raced up the ISN editorial leaderboard this year, even while mergers and acquisitions and the flawed Your Future Your Super (YFYS) performance test dominated the front page.