Australian institutional investors are planning to further expand allocations to private markets, according to new findings from State Street’s fourth annual Private Markets survey, highlighting growing optimism in Australia and the broader APAC region towards alternative investments.
The survey gathered responses from 450 institutional investors globally including multiasset managers, private markets managers, pension funds and insurance companies. 120 and 30 of the survey respondents are based in APAC and Australia respectively.
The data shows Australian institutional investors expect to increase private market allocations to 45% over the next 3 to 5 years, up 6 percentage points from 2024’s survey responses – the largest increase of any APAC country.
6 in 10 of the Australian respondents currently have 10% to 30% of their portfolio allocated to private assets. Over the next 3–5 years, this is expected to shift, with 7 in 10 anticipating an allocation above 30%, and 4 in 10 expecting to allocate more than 50% to private markets. Across APAC more broadly, institutions plan to marginally increase allocations to private markets from 35% to 38% over the 3-5 year period, continuing a steady upward trend noted in previous years.
State Street’s Head of Australia Product Team, Cleyde Hazell, said: “The 2025 survey results reflect confidence in private market assets and growing institutional readiness for alternative vehicles in the current macroeconomic environment. We are seeing increased interest in private markets assets that offer relatively low volatility compared to public markets.
“Renewed uncertainty about the world economic environment from the new US administration’s tariff policies and the possible reciprocations from its major trading partners, is influencing institutions’ investment strategies. Australian investors are responding to these structural and market shifts by embracing private markets and they are doing so more assertively than their regional peers.
“In the 2024–25 Budget, the Australian Government committed $22.7 billion over the next decade to build the ‘Future Made in Australia campaign, which will encourage and facilitate significant private sector investment.
“Although investments in private assets continue to rise, the pace of global growth seems to be levelling off. This trend aligns with findings from our earlier surveys, which suggest that the heightened emphasis on due diligence and evaluating risk versus return—prompted by the higher interest rates of the early 2020s—is resulting in fewer, but higher-quality investments,” said Ms. Hazell.
Semi-liquid retail funds set to drive majority of fundraising
The survey reveals a significant shift in how investors plan to access private markets. Within the next one to two years, retail-style fund vehicles are expected to become the dominant channel for private markets investment globally, with 53% of respondents believing at least half of private market flows will soon come through semi liquid retail products.
This marks a sharp contrast to 2024, when 51% of survey respondents expected traditional institutional fundraising to remain the primary source of capital in the near term.
In Australia, interest in semi-liquid vehicles is also gaining momentum. Currently, about one-third of Australian respondents expect retail will be the key channel for fundraising in the next 2-3 years—up from 17% last year. At the same time, many Australian institutions are shifting away from traditional fundraising channels in favour of retail-focused strategies.
Ms Hazell said: “It’s encouraging to see institutions across Australia taking a leading role in expanding access to private markets. The rising interest in semi-liquid, retail-style fund structures is being driven by product innovation and better access to data, which are making these vehicles more attractive for long-term allocations.
“Regulatory developments will also play a critical role. In Australia, as is the case for North America, lowering means-based barriers to entry – wealth and/or income minimum thresholds – is seen as the key enabler of broader market participation.
“We believe the superannuation industry will take a leading role in expanding access to private markets to the new generation of investors.”
Private equity and private debt set to benefit the most Private equity continues to be the most appealing private markets asset class for institutional investors across APAC. According to the survey, 75% of APAC respondents expect to increase their allocation to private equity over the next two years—higher than the 66% reported globally.
Among APAC countries, respondents from Australia (47%) and Singapore (38%) see private debt benefitting the most from the growth of semi-liquid funds.
Ms Hazell added: “Investors believe private debt is easily securitised and therefore will benefit greater from the growth of individual/DC focused semi liquid funds. Developed APAC has been singled out as a key market for investing in private debt.”
“Geopolitical uncertainty—such as ongoing tensions around tariffs and global trade relationships—have also influenced this shift. These developments appear to be accelerating the democratisation of private markets. The relatively smoother, less volatile return profile of these assets is a key part of their appeal with a significant proportion of APAC respondents citing this as a key reason for increasing allocations,” Ms Hazell.
The flight to quality
Previous surveys showed investors becoming more discerning about their private market investments, with increased focus on due diligence and risk assessment. The 2025 survey suggests the move from quantity to quality is now entrenched in investment strategies.
Further evidence of this flight to quality trend is seen in capital allocation moving from emerging to developed markets.
In APAC, institutions are particularly looking at investment opportunities in North America for private equity investments and in developed APAC for private debt. They are focusing on developed markets because of the flight to quality (or flight from risk). Willingness to invest in Emerging APAC showed the largest decline, with 14% of LP respondents planning allocations in this market, down from 25% in the 2024 research.
APAC leads Gen AI/ LLM adoption but Australia lags behind
Most APAC respondents were shown to be either investing in (31%) or planning to invest in (38%) generative AI (GenAI) and large language models (LLMs) for their private market investments, 12% of APAC institutions are already using the technologies, higher than 8% of their global counterparts.
In contrast, Australian institutions appear to be slower in embracing these technologies. 6 out of 10 respondents are still in the early, aspirational stages of GenAI adoption, lagging behind their regional peers.
Nevertheless, unstructured data remains a key challenge, with half of Australian respondents reporting difficulties in managing it at both the portfolio and project levels. Despite the slower uptake, around 7 in 10 Australian organisations expect their technology spending to rise over the next one to two years, in line with broader regional expectations.
“While many APAC institutions are already unlocking the value of generative AI and large language models in private markets, Australian organisations remain in the early, exploratory stages,” said Ms Hazell.
“Our research shows that while interest is rising, adoption in Australia is notably behind regional peers, with many firms (40%) still uncertain about return on investment,” concluded Ms Hazell. “That said, there is cautious optimism—technology spending is expected to grow, and as institutions gain clarity on GenAI’s impact, we anticipate a more decisive shift in adoption strategies across the country. This technological adoption at the APAC level is seen as a critical enabler for improving decision-making, enhancing risk management, and supporting the democratisation of private markets.”
