This week's chart of the week comes from Morningstar's 2025 Outlook Report. The report designed to help you succeed by bringing together the research and insights from analysts and investors across Morningstar to help you make better investment decisions in the year ahead.

The report brings together the work of over 400 researchers covering six sections that address a key challenge or opportunity faced by investors in 2025. Chapter 4 of the report runs through the pros and cons of investing in private assets, a pertinent topic for most Australian investors that are in industry or public sector superfunds. These funds have large levels of exposure to private assets, particularly in the pre-mixed options. 

This global report takes the Australian superannuation segment as a successful model that has successfully pioneered investment in asset classes such as unlisted infrastructure and property for decades, and many have forays into private credit and private equity. 

The chart of the week looks at private asset allocation by Australian superannuation segment, revealing the large exposure - over 20% - to private assets for those in industry and public sector superfunds. 

Private asset percentages in super funds

Around 16.5% of sector assets are invested in private assets, although for the largest cohort, so-called “industry” funds, this figure exceeds 20%, with unlisted infrastructure as the most popular private asset allocation.

The report elaborates that by allocating to private assets, superfunds are playing to their strengths; their long-term investment horizon and liquidity profile neatly align with those of private assets. First, superannuation investors remain in the super ecosystem for decades. Second, with superannuation being compulsory—reaching 12% of workers’ salaries in 2025—super funds can count on a steady, predictable stream of cash inflows to provide appropriate liquidity buffers. This enables a greater allocation to illiquid assets while being able to deftly handle sudden market selloffs and manage longer-term demographic risks.

As one of the key drawbacks of private assets—liquidity—is less of an obstacle for super funds, the benefits of the asset class can be more freely utilised. A skilled private-asset investment manager can harness the complexity and liquidity premiums from direct investments. Private assets such as infrastructure can also offer direct access to key secular trends such as renewable energy. Additionally, classes such as core infrastructure also tend to have a revenue profile that offers strong inflation insulation, which was a benefit to investors in 2022 when equities and bonds both declined significantly.

Despite the benefits, private-asset investments by super funds have their drawbacks. Compared with public assets, valuations are infrequent—private assets are valued at intervals typically measured in months—and the local regulatory authority has only recently mandated valuations on at least a quarterly basis. A sharp, sudden economic jolt may see listed equities devalued instantaneously; private assets, meanwhile, may not be revalued for months thereafter. This can benefit members who switch out of their super fund before a private asset revaluation, while those remaining are left to absorb the eventual devaluation. For this reason, super fund policies around out-of-cycle valuation triggers are receiving increased attention. Valuation assumptions are another area of recent focus; robust vetting by the fund is required to ensure that private assets are appropriately valued.

Of course, private assets are an umbrella term for what is, ultimately, a diverse asset class. That said, the superannuation fund experience demonstrates that private assets can play a positive role for individual investors, albeit in a setting such as retirement planning, where their potential drawbacks are tempered, and their benefits can be more freely cultivated.

 

The report also explores: 

How to build a portfolio to reach your goals: Investing is fundamentally an exchange of spending power today for the attainment of a goal in the future. Building a portfolio to meet these goals requires a long-term perspective, a commitment to deep research, and a willingness to think (and act) independently. We share some thoughts on how to build a successful portfolio that meets these future needs.

Finding returns in a falling rate environment: As many central banks have started to cut interest rates, cash deposits look less attractive. We look at the alternative options.

The pros and cons of investing in private assets: Private assets have risen to prominence over the past few years as more fast-growing companies are staying in private hands and others are seeking loans from nontraditional sources. We highlight the opportunities and challenges of investing in these popular assets.

The impact of AI on investing in 2025: As artificial intelligence continues to dominate the minds of investors, the opportunities are shifting. We look at where the best investments reside as we enter the new year.

How to build a portfolio that looks after you: Many investors, especially those who have retired, need a portfolio that meets their immediate income needs. This requires a different approach to that used when saving for the future. We identify the key challenges that income-focused investors face and how they can be overcome.

Get more insights from Morningstar in your inbox

More Charts: