Are you ready to be gaslit? - AKA private markets - Where opportunity demands its price of privilege
This bit is going to annoy a LOT of people, especially some that read this, but I can see the cogs of the marketing machine turning to gaslight you into making undesirable portfolio decisions.
If you have a keen eye and look at the tables above, you'll see that active management (in equities) has had a horrid time over the last 3 years. Yes, there are always excuses but as investors, unless you're absolutely on top of managers covering their investment styles, underlying securities, decision making processes and market views – on average you've had a worse outcome than just investing in the major equity indices over the last 3 years.
And this is influencing active management in Australia – the share of active vs passive is shifting as passive vehicles are becoming more prominent. The retail space is no longer the ripe pickings it once was so the fee share and profitability of managers has fallen over time.
The obvious method of counteracting this is to remove your active management from the passive comparison in the first place – thank god for "Alternatives". If you can do that, you can launch new high-fee products that fit within the "Alternatives" bucket that all investors absolutely need to think about increasing their allocation towards – I mean all the institutional investors like industry super and the future fund are, so why aren't you?
The thing about having to deploy many billions of dollars is you need to think about what assets you can potentially access. Industry funds for example can't move the needle for their investors (ahem, sorry I meant "members") by investing in markets like Australian small caps as these markets are too small in size relative to the quantum of capital they manage.
Luckily you and I don't have this issue, and the size of our portfolios isn't going to move the market in any way shape or form, so we don't have a pressing need that exists in institutional markets to access private markets to deploy capital.
I'm not saying that private markets are a bad thing, I think they absolutely have their place in portfolios (I'm a huge fan of private credit!) but instead the range of options for investors in Australia is about to explode and you're going to be asked to invest in private markets because everyone else is – but boy are you going to be paying for it, 2%+ ICRs are normal.
(Maybe the play here is an investment in an asset manager within the "alternatives" space that has historically shown outperformance, has a strong distribution team and aren't shy to lock in a pound of fees. A Merchant of Alternatives so to say)