Private market investments have fallen from favour with financial advice providers who see other income-generating products as more accessible at a lower cost, according to a survey by a global exchange-traded fund (ETF) provider.
The annual “VanEck Australian Smart Beta Survey”, which drew responses from 938 Australian financial services professionals, including financial advisers, brokers, portfolio managers and analysts, found around one-third of respondents were unsure about the outlook for private market investments, such as private credit and private equity, over the next three years.
Additionally, allocations to private assets have fallen, with around half of respondents stating they were invested in private market assets, a decrease from 60 per cent in 2025.
There was also a decline in the number of respondents considering an allocation to private assets from 18 per cent in 2025 to 14 per cent this year, while 35 per cent claimed they had no plans to allocate client funds to those assets, which was an increase on the same sentiment (22 per cent) a year ago.
The leading concerns behind those responses were liquidity constraints (39 per cent), high fees or lack of transparency (18 per cent) and the uncertain regulatory environment (10 per cent).
VanEck Asia-Pacific chief executive Arian Neiron said the short-term appeal of private markets was deteriorating as financial advisers looked to fixed and floating-rate income for high nominal yields with greater liquidity, valuation and transparency.
“With bond yields sitting at around 5 to 7 per cent return for fixed income products such as subordinated debt and floating-rate strategies, investors are questioning whether the risk premium on offer is adequately compensating for the additional risk that comes from investing in private credit,” Neiron said.
“In our view, the premium on offer is becoming harder to justify with so many headwinds. This is strengthening the case for advisers and investors to move their allocations away from private credit and into public markets, particularly income-oriented exposures.
“Our discussions with advisers point to a challenging environment and headwinds for private markets. Appetite is weakening and these concerns are driving portfolio allocation decisions, with ETFs emerging as a direct beneficiary of this shift.
“Looking ahead, we expect fixed income to remain a strong contender for investor capital, but selectivity will be essential with persistent inflation and interest rate uncertainty keeping credit quality and duration in focus.”