Super 'safest' entry in private market for retail investors: Morningstar

Morningstar said super funds could be the safest and most effective option for retail investors to access private market investments.

This, it said, would especially benefit those investors who do not have the capacity to do their own research and due diligence for what are complex asset classes.

Morningstar added super funds have the benefit of long investment horizons, along with having positive, consistent member inflows, which better enable allocations to less liquid assets while still being able to effectively manage liquidity risk.

"Super funds are Australia's mega investors, and for them, investment in private assets is a well-established diversification strategy," Morningstar said.

It added there is also a strong appetite among large super funds to invest in private assets.

"We have seen super funds leverage their scale and participate in taking major infrastructure assets private, for example, Sydney Airport in 2022," Morningstar said.

"On the other hand, we have also seen cases where a major super fund leveraged its scale and expertise to defend against attempts to take publicly listed assets private where it believed they were mispriced."

Morningstar noted super funds typically have internal investment teams to access private markets expertise and gain exposure to newer areas of private markets. Super funds can also leverage their scale to engage top-tier managers and negotiate fees, helping to optimise net returns.

"When investing in private assets, super funds can leverage their institutional scale and expertise to negotiate co-investment allocations on reduced- or zero-fee terms (often referred to as 'no fee, no carry'), which is a vital mechanism for lowering the overall cost of their private investment portfolios," Morningstar said.

Overall, the super sector's allocation to unlisted assets averaged about 16.5% as of June 2025. Industry funds continue to maintain a materially higher allocation to unlisted assets than their retail fund counterparts.

Over the three years to June 2025, infrastructure allocation significantly increased for super funds, while private debt continued to gain traction and was the fastest-growing segment.