Private Markets Gain Ground Amid Regulatory Questions

Private investments are attracting more investor dollars as private equity and credit offer higher returns than traditional share markets. This trend is making private markets more accessible to retail investors, but it also challenges regulators who have traditionally focused on public investments like equities.

Australia’s shrinking ASX highlights this shift, with private markets now covering everything from unlisted tech startups to property loans, estimated at $140 billion. While private capital has expanded rapidly, its regulatory framework remains unclear, prompting a new Australian Securities and Investments Commission (ASIC) report examining private market behaviour.

Private markets have drawn capital at four times the growth rate of public markets but are still viewed as underutilised by industry leaders. Some predict a significant rise in retail and institutional allocation, potentially quadrupling existing levels. Currently, individuals allocate around 4% of their portfolios to private equity, compared to 17% by larger funds.

Globally, there’s a clear shift as top companies opt to remain private longer, avoiding public scrutiny while still accessing significant capital. This trend has raised concerns about regulatory oversight and transparency, with ASIC monitoring whether reduced public listings signal deeper issues in equity markets or simply a broader move towards private investment structures.

Major fund managers and financial institutions are adapting by expanding into private asset management, creating structures that allow more investors to participate in private equity and direct lending. However, some argue for balanced regulation, ensuring governance rules are applied equally across public and private markets.

Source: Australian Financial Review, MSCI, Adam Street, Capital Brief