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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.
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.
Rising demand for global small- and mid-caps has seen Bell Asset Management awarded a $500 million mandate from Hostplus.
“Most of the new capital that’s come into the markets… has been chasing fads,” says David Chan, portfolio manager at MLC Private Equity. “The latest hot opportunity, whether it be an unprofitable tech company that’s growing very rapidly, or a very large scale buyout that’s the headline of tomorrow’s AFR.”
The Albanese Government has begun to explore the potential negative impacts of super fund consolidation. The question is whether a super fund can ever be too big to fail.
Hostplus CIO Sam Sicilia believes the trillions of dollars washing around super could be put to good use in nation-building projects – and that criticisms of investing in unlisted assets are an “absurdity”.
Overseas, Australia’s biggest super fund is a small fish in a massive pond. To achieve the scale it wants it will have to dive deeper into the private markets, meeting stiff competition from its North American peers along the way.
Australia’s super funds have been leaders in adopting private markets investing, but they’ve still got a long way to go. Overcoming the obsession with liquidity will be one hurdle, says the boss of $900 billion private markets manager Hamilton Lane.
Super fund members have been “spared the worst”, while the outperformance of the top ten funds was generated by active management and chunky allocations to private markets.
“When it comes to super, all the evidence points to the more you pay, the less you get. There’s lots of reasons for that, the most fundamental of which is that active management really struggles to outperform the market.”
