AUSTRALIA Trends and Developments Contributed by: Andrew Stone, Dhanushka Jayawardena, Andrew Choi and Chris Kinsella, Holding Redlich
and co-investments are sought out for the stream - lined user experience provided to financial advisers and their clients. Those providers offer an attractive potential capital source for alternative fund managers in Australia. Conversely, Australian wealth management platforms are developing their resources and their expertise in sourcing appropriate alternative investment manag - ers. Continued growth in private credit The global expansion of private credit markets con - tinues to influence Australian alternative managers. Many global private equity firms have continued to evolve into significant private credit providers, recog - nising the attractive risk-adjusted returns and steady income characteristics of credit strategies. Australian managers are following this trend. Many traditional equity-focused firms are adding credit capabilities or launching dedicated credit platforms. Australian-specific trends Public market concentration challenges Australia faces unique challenges related to public market concentration. This creates opportunities for alternative fund managers in terms of total market size, but also creates regulatory challenges. At a regulatory symposium convened by the Austral - ian Securities and Investments Commission (ASIC) in June 2025, an expert panel discussed how concentra - tion in Australian public markets is being influenced by strong growth in passively managed exchange traded funds. In addition, Australian superannuation funds comprise approximately 50% of the domestic equity market and are required to annually report on their performance under what is referred to as the “Your Future, Your Super” regime. This legislation incentiv - ises superfunds to track conservative benchmarks rather than pursue outperformance or absolute return strategies. The very strong share price growth of the Commonwealth Bank of Australia in the six months to 30 June 2025 was said to be evidence of this trend. This is providing investment managers with opportu - nities, both on the capital side and the investments
side. On the capital side are investors actively seek - ing greater diversification. On the investments side is a public market with potentially mispriced assets. There is evidence of alternative managers exploring strategies that benefit from public market inefficien - cies through activist investing, special situations, and other opportunistic approaches. Market efficiency concerns and investment innovation The combination of index fund growth, benchmark- focused superfund investing, and the potential for short-term mindsets among listed company boards has created an environment in which public markets may not be functioning as intended. This potential inefficiency in capital allocation creates opportunities for alternative managers to add value through active management and longer-term investment horizons. Private markets as a solution Given the challenges in public markets, private mar - kets play an increasingly important role for both wholesale and retail investors in Australia. Private markets offer diversification benefits that are particu - larly valuable, given the concentration challenges in public markets. The perception of private markets has evolved signifi - cantly during the past decade. Previously viewed as higher-risk owing to the prominence of venture capital, private markets now provide exposure across the risk spectrum, including various forms of debt, infrastruc - ture, real estate, and private equity outside of venture capital. Valuation and standardisation challenges The Australian alternative investment industry faces ongoing challenges related to asset valuation and standardisation. Different investors can determine vastly different valuations for the same asset under identical circumstances, creating inefficiencies and potential disputes. The lack of standardised valuation methodologies is particularly problematic for assets such as real estate, where valuations might be based on compa - rable transactions, financial models, discounted cash flow analyses or a combination thereof in each case
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