Louise Watson
Australian institutional investors, particularly superfunds, plan to look beyond the near-term noise and remain invested in US markets in 2026, according to Natixis IM’s 2026 Institutional Investor Outlook.
Four in five investors acknowledge the return potential in private markets is higher than in public markets, and as a result, 37% have increased target allocation to private markets for 2026.
Natixis IM, in collaboration with CoreData research, surveyed 515 institutional investors for their 2026 outlook on macro and markets. Collectively respondents manage US $29.9T globally in assets for public and private pensions, including superannuation funds, insurers, foundations, endowments, central banks, and sovereign wealth funds around the world.
Louise Watson, Country Head of Australia & New Zealand, Natixis IM, said, “Markets around the world have proved remarkably resilient in 2025, with most equity indices posting a third consecutive year of double-digit returns during a period marked by tariffs, geopolitical conflicts and supply chain shocks. “As long-term investors, many of our superannuation fund clients are feeling optimistic about what’s to come in 2026 and beyond. While 2026 may bring a degree of uncertainty, the enticing opportunity in private markets gives investors an opportunity to leverage a tactical play in this space for attractive returns, diversification and risk management in the new year.
“While we’re starting to see some speculative premium in public market valuations leak out of the widely touted AI bubble, we still expect AI to drive productivity improvements across private markets and especially middle market companies. Our view is that there is a low probability of a near term recession in the US because these companies are starting to use AI technologies to support a wide variety of functions to drive customer growth and retention data as well as improving business margins.”
The proof is in private markets
The headline investors are anticipating in 2026 is that the 60:20:20 alternatives-diversified portfolio outperforms (83%) the traditional 60:40 equity bonds portfolio (17%).
Investors are bullish on private equity (63%), private debt (50%) and residential real estate (57%). In particular, 73% see the potential for attractive returns in private equity secondaries, rather than just as a source of liquidity.
Investors conviction over the longer term remains, as 40% plan to increase allocations to private markets over the next 10-15 years. This is as 87% expect relaxed regulation with respect to private market access will incentivize more companies to stay private for longer.
Tariff trouble to opportunity
With tariffs dominating headlines throughout 2025, 90% of investors are certain that the global tariff environment will remain a moving target into 2026.
Overall sentiment suggests that institutions are bracing for big shifts in the macroeconomic landscape in 2026 as 73% now believe political dysfunction is a growing threat to market stability.
Four in five investors agree that regardless of how high or how long tariffs are in place, manufacturing is unlikely to return to the US in a meaningful way. Instead, tariffs are rallying investor optimism in other ways, as 47% think a US-China trade war will help create a fertile environment for emerging markets to rise.
As emerging markets shift into focus, more than half of institutions now think India will surpass China as the leading emerging market and easing monetary policy in the developed world will help accelerate growth (83%).
Love/Hate relationship with the AI bubble
For the first time in five years, the tech bubble (47%) surpasses geopolitics as investors’ top concerns going into 2026. This is followed by re-inflation (43%), geopolitical shock (40%), government debt/fiscal crisis (40%), and a breakdown in global trade (37%).
While Australian investors are loving the AI fuelled returns, they have bubble concerns, with 83% believing AI is a bubble compared to just 46% globally. 77% think the S&P will hang on to finish the year at an all-time, but into 2026 almost half predict the AI bubble will finally burst.
With that in mind, almost nine in ten Australian investors agree markets are due for a correction in the new year. Almost half (47%) predict a market downturn of 10%-20% and 21% predict a correct of more than 20%.