Last year was a profound one for private markets in Australia, with several overseas managers either shaking up their offering, launching new products and/or entering the Australian market in general. These dynamics are likely to be persistent as fundamental change is afoot.

In the past 12-18 months, we’ve seen several eminent players like KKR, Partner’s Group, Hamilton Lane, Apollo and EQT launching new products designed for the local market with the private wealth (or wholesale) channel being the key destination of choice.

This is partly a function of both the consolidation in the superannuation sector and the drive towards internalisation of investment teams, which has resulted in mandate losses and extreme downward pressure on fees. This has in turn compelled many public and private markets managers to switch their crosshairs toward alternative distribution channels (or, in some cases, offshore).

Notwithstanding the ability to circumvent the slower superannuation sector, extract higher fees and generally raise capital more quickly, overseas players looking to target the private wealth space face a conundrum: how to navigate the unique landscape of the Australian wealth sector.

Compared to international markets, such as the UK, which are often characterised by large, centralised intermediaries, Australia’s wealth sector is highly fractured and relies on a multiplicity of local gatekeepers to client money – including internal CIOs and research teams, third-party platforms, asset consultants, independent researchers that often sit on investment committees, and managed account firms– all of whom that are relatively unknown to offshore asset management firms.

The last couple of years especially has seen the influence of independent advice groups (IFA’s) increase dramatically – that is, firms outside the major networks that, in some cases, can be managing billions worth of client money. While these smaller groups may have internal research/CIO capabilities, they more commonly outsource these requirements to asset consultants and/or off-the-shelf managed account providers. This enables them to not only focus on excellent strategic planning and client servicing, but also free up time to take on additional clients – a no-brainer for those able to put their ego aside.

At the upper end of the spectrum, even the most sophisticated of the wealth crowd typically rely on at least one intermediary layer to conduct their business. Whether they’re a private bank using a platform designed to hold niche, alternative investments, or a family office looking to engage institutional-level consultants to provide an extra layer of confidence on asset allocation, entering the Australian wholesale channel successfully is often dependent on winning the confidence of these esteemed gatekeepers.

Cracking the wholesale, retail and/or family office channels in Australia often means successfully liaising with and navigating several of these intermediary stakeholders, as even the most sophisticated of the lot often rely on at least one to conduct their business.

For distributors, though, this isn’t the only hurdle – larger shops like LGT Crestone, Morgan Stanley and JBWere have built increasingly sophisticated internal research teams concerned with manager due diligence, and tactical and strategic asset allocation. Not ones to be swayed by brand names or long lunches, building trust with each research team requires the same level of care and attention as their larger institutional counterparts. Additionally, several have built (or are building) their own in-house platforms designed specifically for the needs of their advisers, which differ between firms.

In the family office space, deep, longstanding relationships built on trust have always been the bedrock of a successful capital raise – regardless of where you are in the world. Knowing who and where they are, and what they want, is a unique attribute and one both local and global managers alike are willing to pay premiums for when adding to their distribution team.  

As such, the skillset required to run wholesale go-to-market strategies has become increasingly specialised – particularly for private markets players with complex valuations, liquidity considerations and fee structures compared to their public market counterparts.

The days of relying on wining, dining and big nights out to get the money through the door are dwindling – the best candidates in the distribution space not only come with broad, deep relationships, but the technical expertise to articulate, advise on and even assist in constructing the very products they’ll be taking to market.

Among my distribution candidates “private markets” has almost become the default answer to “what do you want to sell?” – and understandably so, considering many of the top jobs are offering lucrative long-term incentives (LTI’s) in the form of carried interest, on top of base packages in the $300,000 – 450,000 range. Oh, and don’t forget the 50–150% cash bonus on top.

With the competition expected to heat-up in 2024, it’ll become crucial for managers to make sure they don’t just bring a product to market, but also fine tune every aspect to make sure there’s as little friction as possible between the end investor and each successive intermediary. Time is of the essence, especially in a space where long lockup periods are prevalent.

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