Retail investor appetite for private markets is demonstrating resilience, expanding despite a surge in redemption requests in the United States and heightened scrutiny from Australia’s corporate regulator. A new report from State Street, a global financial services and bank holding company that provides investment management and servicing, revealed that 85 per cent of Asia Pacific asset and wealth managers are actively broadening their retail strategies within the private markets space. This growth is largely driven by younger generations taking more direct control of their financial investments, according to State Street’s Singapore-based senior managing director for global alternatives, Eric Chng.
However, this expansion occurs against increasing challenges. Redemption requests at Apollo’s flagship retail private credit fund surged to 17 per cent of its value in the second quarter, while a US$7 billion private credit fund managed by Morgan Stanley capped withdrawals at 5 per cent. In the US, where the private credit market has swelled to US$1 trillion, rising defaults and withdrawal limits are prompting regulators to examine risks at major funds, including those run by Blackstone and Blue Owl. Locally, Australia’s corporate regulator has voiced concerns about valuation practices within some private credit funds, following a review that indicated the sector is encountering its first significant period of stress.
Despite these pressures, capital flows suggest retail exposure to private markets remains robust. Sydney-based Barwon Investment Partners portfolio manager Bob Liu noted that while redemptions cause doubt, inflows into other private market strategies like real estate, private equity, infrastructure, and multi-strategy funds have stayed resilient. Experts suggest ‘gating provisions,’ allowing funds to temporarily restrict withdrawals, are appropriate, though investor understanding needs improvement. Christian Ryan, founder of Melbourne-based FinCap, a private markets investment platform, highlighted superior opportunities in private markets over listed spaces. He noted high-growth companies in sectors like AI and defence often remain private longer, attracting retail interest. Felicity Walsh of Franklin Templeton stressed greater education is crucial for non-institutional investors to understand liquidity and investment needs.
