October 8, 2025 • 14 mins
A big slice of Australia’s retirement savings is tied up in so-called private markets — assets that don’t trade on stock exchanges and are often hard to value or sell. This week, Rebecca Jones speaks with reporter Richard Henderson about what happens when those opaque investments go wrong, and what that reveals about the growing risks inside the A$4.3 trillion super system.
As more super funds pour money into unlisted real estate, private equity and infrastructure, regulators are sounding the alarm about transparency and valuation. We unpack what the watchdog’s warnings mean for investors, why these deals can turn sour quickly, and how Australia’s biggest funds are managing the balance between risk and return in the race to grow members’ savings.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
What happens when your super fun makes a wrong move.
Speaker 2 (00:05):
When we talk about private markets, all we really know
at the moment is that they're growing very rapidly in
Australia and we'd like to understand them better. What we're
really worried about there is opacity.
Speaker 3 (00:17):
What happened with Art is not an issue against the
asset class, nor is it an issue against RT itself.
It just is a challenge going forward when you manage
illiquid assets.
Speaker 1 (00:29):
Hello, I'm Rebecca Jones and welcome to the Bloomberg Australia Podcast.
A big slice of our retirement savings is being poured
into what's known as the private market. So what is
the private market? Well, for one, these investments are often opaque,
hard to value, and quite frankly, they're pretty tricky to
keep track of. In fact, if you wanted to know
(00:52):
what many of these assets are worth, or even where
they are, it's something you'd struggle to find out. So
today I'm talking to Melbourne based reporter Rich Henderson to
explore what happens when some of those big bets in
the private market go bad and what the fall AUP
means for our superbalances.
Speaker 2 (01:11):
Rich, welcome, back, thank you very much.
Speaker 1 (01:13):
First of all, private market. It's a really broad term, right,
Can you explain what kind of investments these assets are
exactly and on average how much of Australia's retirement savings
are being invested in them?
Speaker 2 (01:28):
Yes, good question. So basically, this is anything that is unlisted,
and that is anything that doesn't trade on a stock
exchange basically or some type of exchange. Bonds can trade
on an exchange as well, So it's anything from private
equity you might access through a private equity fund, or
(01:49):
infrastructure or real estate. It's anything that fits that that bucket.
Something that you can't trade, you know, like you can
trade stock, which you can do now from your phone
in a few minutes. These things you might need specialist
funds or brokers to actually transact, and that means they're
less liquid and liquidity that all that means is you know,
(02:12):
the ease of buying or selling. So it's a little
less easy to buy and sell these assets, and so
investors demand what they call in the industry and illiquidity premium,
that little extra reward you get in investment returns for
owning something that you can't buy and sell very quickly.
And keep in mind private markets can make up say
(02:33):
twenty to twenty five percent of a typical super funds portfolio,
so it's not an insignificant sum.
Speaker 1 (02:40):
As you just mentioned. Then real estate is a big
part of these markets. Bloomberg News broke a story just
last week which gave us a really you know, a
really stark example of what happens when a big unlisted
property investment goes horribly wrong. And this time it happened
to Australian Retirement Trust, which which is the second biggest
(03:01):
pension fund in Australia. Tell us about what happened there.
Speaker 2 (03:05):
Rich so Art purchased a property in the state of Washington,
just outside of Seattle, and at the time, at the
start of twenty twenty, it seemed like a great deal.
The towers were full of Microsoft employees, that was the
(03:25):
anchor tenants, and unfortunately we had a pandemic.
Speaker 1 (03:30):
Yeah, I was going to say the I mean, yes.
Speaker 2 (03:33):
The hybrid work movement completely changed how large companies, especially
those in tech, where you don't really physically need to
be there. It's not like you're a waiter in a
cafe or something, or on a production line. Obviously, more
people working from home less requirement for physical office space. Well,
(03:55):
the value of that asset has declined and pretty sharp
I think roughly half of where to speak in broad terms,
and so Art appear to have made the decision to
walk away from that asset. It was partly financed with
a loan, and essentially through documents we've accessed through the
(04:16):
Bloomberg terminal, we can see that Art is defaulting on
that loan, which is an apparent move to walk away
from that asset because of the sharp dropping value.
Speaker 1 (04:27):
Gosh. So this story was truly an international work for Bloomberg,
involving bureaus of Cross Los Angeles, here in Melbourne and
of course in Seattle. Ana Edgit and our Seattle bureau
chief actually went down to check out this office tower, which,
as you mentioned, is just outside of the Seattle business district.
(04:49):
This is what you found. Here's Anna.
Speaker 4 (04:51):
Now, when we confirmed that Rit was going to walk
away from these two buildings, I wentever to belve you
to get a feel for this braver And development. The
office towers were almost totally empty. In the first Bravern building,
the elevators appeared to be turned off. There are two
restaurants in the lobby, a high end steakhouse that wasn't
even opened for the lunchtime hour, and a highly acclaimed
(05:11):
Chinese restaurant that only had one table occupied at one
pm on a Thursday. I spoke with the manager and
he said there was a flurry of interest when that
location first opened in March, after Microsoft had already vacated
the building, but business has been pretty slow since then.
In the lobby of the second Bravern tower, it was
also empty, and the Name and Marcus that was on
the ground level was closed. On the same block, there's
(05:34):
an apartment building and two levels of outdoor retail space
filled with luxury stores like Prada, Gucci, Louis Vutan. There's
a high end jewelry store. There were some people milling
around on a Thursday afternoon, but it certainly wasn't bustling.
The manager of a tea shop told me that there
is some business from residents of the apartments, but she
(05:54):
has really seen a decline in foot traffic without Microsoft
workers walking by on their way to office buildings. She
said she's still optimistic for Bellevue more broadly, because it
does attract a lot of wealth, and she's betting on
the holiday shopping season to help them get by for now.
Speaker 1 (06:09):
So there you have something that was a sure bit
of twenty twenty is now resembling more of a ghost town.
I guess you know which I guess also shows that
fortunes can turn around pretty quickly.
Speaker 3 (06:21):
Rich.
Speaker 1 (06:21):
Is this part of the reason why these harder to
sell assets are generally considered more risky than the likes
of stocks and things that are publicly listed on exchanges
where we can see the values literally change.
Speaker 2 (06:33):
Yeah, definitely, the liquidity of say, you know, publicly traded
stocks like Apple or Navidia, you can really get a
sense of their valuation. You know exactly what profits they're
are generating because they have to disclose it. That's a
requirement of being a public company. With a kind of
office tower like this, it's harder. You know, it's quite idiosyncratic.
(06:55):
You have here, Microsoft, which is a great business to
be as a tenant one imagine, very stable, very large,
but it also put in its own money to refurbish
the buildings, and so you know, when that tenant leaves,
it's hard to you know, be able to model or
you know, factor in getting a replacement tenant. And then
(07:18):
what kind of income thatat may generate, what kind of
value that building therefore may have a relative to something
like a stock that you can see on your phone.
Speaker 1 (07:27):
And when we come back, we're not the only ones
paying attention here why Australia's super funds have been put
on noticed by our regulator about their growing piles of
private assets. You're listening to the Bloomberg Australia podcast. Welcome
back to the Bloomberg Australia Podcast. You're here with me
(07:47):
Rebecca Jones, and I'm talking to reporter Rich Henderson about
the massive chunks of our retirement savings invested in private
markets and what happens when these investments go wrong like
they did recently for a Stan retirement trust that's defaulting
on a loan it used to buy a huge office
complex outside of Seattle, meaning they're essentially writing off the assets.
(08:09):
But Rich, this is not the first time this has
happened in history, is it now? Ossie Super also got
burnt by more than a billion dollars last year thanks
to a failed private equity investment. What does all of
this tell us, broadly about the risks that Australian funds
are taking overseats with our money.
Speaker 2 (08:29):
Yeah, so it really speaks to the risk within the
risk return paradigm. And as large super funds, you know,
as the system as a whole is getting more assets,
it's needing to diversify those assets beyond Australia. Essentially the
system has outgrown Australia and so because of that it
(08:50):
needs to invest more overseas. These funds need to invest
into into listed markets like the US stock market, but
also unlisted markets and so that that's why the money
is going too these places. And you know, you do
need to have the soured bets. You know, that's all
part of the investment kind of ecosystem. And it's that
(09:11):
risk element that makes these attractive because higher risk, you know,
really does bring higher returns. And so you know, this
isn't a zero risk investment or a sector and so
these you know, these losses essentially are part and parcel
of the risks that Australian funds are having to having
to take. You know, many of them will be hugely successful,
(09:33):
but there will also be these examples of what looked
like failures.
Speaker 1 (09:38):
Risk of course is part of any game of investment, right,
but you know what I think is particularly interesting is
how ask our regulator is becoming increasingly nervous about these
private assets, especially when it does come to their valuations.
Rich can you tell me about the report that they
released last week after reviewing what like sixty odd funds
financial reports?
Speaker 3 (09:59):
Do they luck?
Speaker 2 (10:00):
But they saw they were very cautious on the whole
topic really and essentially they're asking investors and the consultants
that help audit their financials. They're asking them to kick
the tires. They're saying, we want you guys to ask
more questions to be really sure of some of the
valuations you're receiving from the external investment managers who oversee
(10:24):
these assets. And it's a very dense, quite tricky topic
because a lot of these assets are very different, a
lot of the methodologies can differ, a lot of the
frequency on those valuations can differ. And because some of
them are super idiosyncratic, you as an external fund manager
working for an Australian super or an art you might
(10:49):
have to look at peer transactions, you know, transactions of
assets that are sort of like the data center you
own or the office tower you own, and say, well
that sold for that price, so I reckon now around
this price. So it's quite hard to come up with
evaluation methodology. But basically the regulator is saying, because you
guys are investing more in these things, do you really
(11:09):
have to understand them better?
Speaker 1 (11:11):
Why is it though so important that we know how
much these investments are worth or you know, indeed how
much they've dropped when they are such a relatively small
portion of these big super funds portfolio.
Speaker 2 (11:26):
Yeah, for some it can be a blip, you know,
these kind of you know, missteps if we if we
should call it that. But really the regulator wants confidence,
you know, so super fund members are confident in the
overall system that these funds are properly investing this money.
They are you know, stewards of this capital on behalf
(11:46):
of super fund members and so that's really what's behind this.
And I think they're also seeing this growth in Australian
super funds investing any type of assets and they're saying, Okay,
we need to really be thoughtful of about how we
oversee this and we want to be ahead of any big,
you know blow ups, you know, because these are so liquid,
(12:08):
sometimes the valuations you're getting This is a paper, This
is a paper valuation when you really need to sell
it in a in a stressed market scenario, you really
need to get rid of that office tower, you might
be having to stomach some really big losses. And so
I think that the regulators really trying to make funds
and the general public more aware of this and to
(12:30):
make those valuations super robust.
Speaker 1 (12:32):
And yet for all of this, the funds are still
under pressure to deliver decent returns. You know, at the
end of the day, this is our retirement savings money.
But they can't just park that, you know, four point
three trillion dollars into term deposits, can they? Is there
any way to avoid investing in private assets entirely or
(12:53):
is that just not possible anymore?
Speaker 2 (12:56):
I think it's it's possible, but it's probably not just
hoirable from a diversification point of view, and you know,
really wanting that geographic diversification and also diversification across asset classes.
So I think on the flip side, you know, the
super funds would probably be criticized for not putting you know,
(13:16):
their money into you know, private equity, private credit infrastructure
if they weren't. So, so you know, it's it's really
about you know, doing the best for the super fund members,
really getting a nice diversified acid allocation and making sure
you understand it.
Speaker 1 (13:32):
And maybe meditate a little bit on what the word
risk really means.
Speaker 2 (13:36):
Yes, and cross your fingers and hope it, you know,
goes up.
Speaker 1 (13:40):
Rich, thanks so much for joining me. Thank you very much.
Have you found today's conversation insightful. Be sure to follow
the Bloomberg Australia Podcast wherever you listen, and check for
more reading on Australia's for trillion dollars super industry, including
the latest reporting from Rich Henderson on Bloomberg dot Com.
Today's episode was recorded on the traditional lands of the
will run to read people. It was produced by Paul
(14:02):
Allen and edited by Chris Burke and Ainsley Chandler. I'm
Rebecca Jones and I'll see you next week.
What happens when your super fun makes a wrong move.
Speaker 2 (00:05):
When we talk about private markets, all we really know
at the moment is that they're growing very rapidly in
Australia and we'd like to understand them better. What we're
really worried about there is opacity.
Speaker 3 (00:17):
What happened with Art is not an issue against the
asset class, nor is it an issue against RT itself.
It just is a challenge going forward when you manage
illiquid assets.
Speaker 1 (00:29):
Hello, I'm Rebecca Jones and welcome to the Bloomberg Australia Podcast.
A big slice of our retirement savings is being poured
into what's known as the private market. So what is
the private market? Well, for one, these investments are often opaque,
hard to value, and quite frankly, they're pretty tricky to
keep track of. In fact, if you wanted to know
(00:52):
what many of these assets are worth, or even where
they are, it's something you'd struggle to find out. So
today I'm talking to Melbourne based reporter Rich Henderson to
explore what happens when some of those big bets in
the private market go bad and what the fall AUP
means for our superbalances.
Speaker 2 (01:11):
Rich, welcome, back, thank you very much.
Speaker 1 (01:13):
First of all, private market. It's a really broad term, right,
Can you explain what kind of investments these assets are
exactly and on average how much of Australia's retirement savings
are being invested in them?
Speaker 2 (01:28):
Yes, good question. So basically, this is anything that is unlisted,
and that is anything that doesn't trade on a stock
exchange basically or some type of exchange. Bonds can trade
on an exchange as well, So it's anything from private
equity you might access through a private equity fund, or
(01:49):
infrastructure or real estate. It's anything that fits that that bucket.
Something that you can't trade, you know, like you can
trade stock, which you can do now from your phone
in a few minutes. These things you might need specialist
funds or brokers to actually transact, and that means they're
less liquid and liquidity that all that means is you know,
(02:12):
the ease of buying or selling. So it's a little
less easy to buy and sell these assets, and so
investors demand what they call in the industry and illiquidity premium,
that little extra reward you get in investment returns for
owning something that you can't buy and sell very quickly.
And keep in mind private markets can make up say
(02:33):
twenty to twenty five percent of a typical super funds portfolio,
so it's not an insignificant sum.
Speaker 1 (02:40):
As you just mentioned. Then real estate is a big
part of these markets. Bloomberg News broke a story just
last week which gave us a really you know, a
really stark example of what happens when a big unlisted
property investment goes horribly wrong. And this time it happened
to Australian Retirement Trust, which which is the second biggest
(03:01):
pension fund in Australia. Tell us about what happened there.
Speaker 2 (03:05):
Rich so Art purchased a property in the state of Washington,
just outside of Seattle, and at the time, at the
start of twenty twenty, it seemed like a great deal.
The towers were full of Microsoft employees, that was the
(03:25):
anchor tenants, and unfortunately we had a pandemic.
Speaker 1 (03:30):
Yeah, I was going to say the I mean, yes.
Speaker 2 (03:33):
The hybrid work movement completely changed how large companies, especially
those in tech, where you don't really physically need to
be there. It's not like you're a waiter in a
cafe or something, or on a production line. Obviously, more
people working from home less requirement for physical office space. Well,
(03:55):
the value of that asset has declined and pretty sharp
I think roughly half of where to speak in broad terms,
and so Art appear to have made the decision to
walk away from that asset. It was partly financed with
a loan, and essentially through documents we've accessed through the
(04:16):
Bloomberg terminal, we can see that Art is defaulting on
that loan, which is an apparent move to walk away
from that asset because of the sharp dropping value.
Speaker 1 (04:27):
Gosh. So this story was truly an international work for Bloomberg,
involving bureaus of Cross Los Angeles, here in Melbourne and
of course in Seattle. Ana Edgit and our Seattle bureau
chief actually went down to check out this office tower, which,
as you mentioned, is just outside of the Seattle business district.
(04:49):
This is what you found. Here's Anna.
Speaker 4 (04:51):
Now, when we confirmed that Rit was going to walk
away from these two buildings, I wentever to belve you
to get a feel for this braver And development. The
office towers were almost totally empty. In the first Bravern building,
the elevators appeared to be turned off. There are two
restaurants in the lobby, a high end steakhouse that wasn't
even opened for the lunchtime hour, and a highly acclaimed
(05:11):
Chinese restaurant that only had one table occupied at one
pm on a Thursday. I spoke with the manager and
he said there was a flurry of interest when that
location first opened in March, after Microsoft had already vacated
the building, but business has been pretty slow since then.
In the lobby of the second Bravern tower, it was
also empty, and the Name and Marcus that was on
the ground level was closed. On the same block, there's
(05:34):
an apartment building and two levels of outdoor retail space
filled with luxury stores like Prada, Gucci, Louis Vutan. There's
a high end jewelry store. There were some people milling
around on a Thursday afternoon, but it certainly wasn't bustling.
The manager of a tea shop told me that there
is some business from residents of the apartments, but she
(05:54):
has really seen a decline in foot traffic without Microsoft
workers walking by on their way to office buildings. She
said she's still optimistic for Bellevue more broadly, because it
does attract a lot of wealth, and she's betting on
the holiday shopping season to help them get by for now.
Speaker 1 (06:09):
So there you have something that was a sure bit
of twenty twenty is now resembling more of a ghost town.
I guess you know which I guess also shows that
fortunes can turn around pretty quickly.
Speaker 3 (06:21):
Rich.
Speaker 1 (06:21):
Is this part of the reason why these harder to
sell assets are generally considered more risky than the likes
of stocks and things that are publicly listed on exchanges
where we can see the values literally change.
Speaker 2 (06:33):
Yeah, definitely, the liquidity of say, you know, publicly traded
stocks like Apple or Navidia, you can really get a
sense of their valuation. You know exactly what profits they're
are generating because they have to disclose it. That's a
requirement of being a public company. With a kind of
office tower like this, it's harder. You know, it's quite idiosyncratic.
(06:55):
You have here, Microsoft, which is a great business to
be as a tenant one imagine, very stable, very large,
but it also put in its own money to refurbish
the buildings, and so you know, when that tenant leaves,
it's hard to you know, be able to model or
you know, factor in getting a replacement tenant. And then
(07:18):
what kind of income thatat may generate, what kind of
value that building therefore may have a relative to something
like a stock that you can see on your phone.
Speaker 1 (07:27):
And when we come back, we're not the only ones
paying attention here why Australia's super funds have been put
on noticed by our regulator about their growing piles of
private assets. You're listening to the Bloomberg Australia podcast. Welcome
back to the Bloomberg Australia Podcast. You're here with me
(07:47):
Rebecca Jones, and I'm talking to reporter Rich Henderson about
the massive chunks of our retirement savings invested in private
markets and what happens when these investments go wrong like
they did recently for a Stan retirement trust that's defaulting
on a loan it used to buy a huge office
complex outside of Seattle, meaning they're essentially writing off the assets.
(08:09):
But Rich, this is not the first time this has
happened in history, is it now? Ossie Super also got
burnt by more than a billion dollars last year thanks
to a failed private equity investment. What does all of
this tell us, broadly about the risks that Australian funds
are taking overseats with our money.
Speaker 2 (08:29):
Yeah, so it really speaks to the risk within the
risk return paradigm. And as large super funds, you know,
as the system as a whole is getting more assets,
it's needing to diversify those assets beyond Australia. Essentially the
system has outgrown Australia and so because of that it
(08:50):
needs to invest more overseas. These funds need to invest
into into listed markets like the US stock market, but
also unlisted markets and so that that's why the money
is going too these places. And you know, you do
need to have the soured bets. You know, that's all
part of the investment kind of ecosystem. And it's that
(09:11):
risk element that makes these attractive because higher risk, you know,
really does bring higher returns. And so you know, this
isn't a zero risk investment or a sector and so
these you know, these losses essentially are part and parcel
of the risks that Australian funds are having to having
to take. You know, many of them will be hugely successful,
(09:33):
but there will also be these examples of what looked
like failures.
Speaker 1 (09:38):
Risk of course is part of any game of investment, right,
but you know what I think is particularly interesting is
how ask our regulator is becoming increasingly nervous about these
private assets, especially when it does come to their valuations.
Rich can you tell me about the report that they
released last week after reviewing what like sixty odd funds
financial reports?
Speaker 3 (09:59):
Do they luck?
Speaker 2 (10:00):
But they saw they were very cautious on the whole
topic really and essentially they're asking investors and the consultants
that help audit their financials. They're asking them to kick
the tires. They're saying, we want you guys to ask
more questions to be really sure of some of the
valuations you're receiving from the external investment managers who oversee
(10:24):
these assets. And it's a very dense, quite tricky topic
because a lot of these assets are very different, a
lot of the methodologies can differ, a lot of the
frequency on those valuations can differ. And because some of
them are super idiosyncratic, you as an external fund manager
working for an Australian super or an art you might
(10:49):
have to look at peer transactions, you know, transactions of
assets that are sort of like the data center you
own or the office tower you own, and say, well
that sold for that price, so I reckon now around
this price. So it's quite hard to come up with
evaluation methodology. But basically the regulator is saying, because you
guys are investing more in these things, do you really
(11:09):
have to understand them better?
Speaker 1 (11:11):
Why is it though so important that we know how
much these investments are worth or you know, indeed how
much they've dropped when they are such a relatively small
portion of these big super funds portfolio.
Speaker 2 (11:26):
Yeah, for some it can be a blip, you know,
these kind of you know, missteps if we if we
should call it that. But really the regulator wants confidence,
you know, so super fund members are confident in the
overall system that these funds are properly investing this money.
They are you know, stewards of this capital on behalf
(11:46):
of super fund members and so that's really what's behind this.
And I think they're also seeing this growth in Australian
super funds investing any type of assets and they're saying, Okay,
we need to really be thoughtful of about how we
oversee this and we want to be ahead of any big,
you know blow ups, you know, because these are so liquid,
(12:08):
sometimes the valuations you're getting This is a paper, This
is a paper valuation when you really need to sell
it in a in a stressed market scenario, you really
need to get rid of that office tower, you might
be having to stomach some really big losses. And so
I think that the regulators really trying to make funds
and the general public more aware of this and to
(12:30):
make those valuations super robust.
Speaker 1 (12:32):
And yet for all of this, the funds are still
under pressure to deliver decent returns. You know, at the
end of the day, this is our retirement savings money.
But they can't just park that, you know, four point
three trillion dollars into term deposits, can they? Is there
any way to avoid investing in private assets entirely or
(12:53):
is that just not possible anymore?
Speaker 2 (12:56):
I think it's it's possible, but it's probably not just
hoirable from a diversification point of view, and you know,
really wanting that geographic diversification and also diversification across asset classes.
So I think on the flip side, you know, the
super funds would probably be criticized for not putting you know,
(13:16):
their money into you know, private equity, private credit infrastructure
if they weren't. So, so you know, it's it's really
about you know, doing the best for the super fund members,
really getting a nice diversified acid allocation and making sure
you understand it.
Speaker 1 (13:32):
And maybe meditate a little bit on what the word
risk really means.
Speaker 2 (13:36):
Yes, and cross your fingers and hope it, you know,
goes up.
Speaker 1 (13:40):
Rich, thanks so much for joining me. Thank you very much.
Have you found today's conversation insightful. Be sure to follow
the Bloomberg Australia Podcast wherever you listen, and check for
more reading on Australia's for trillion dollars super industry, including
the latest reporting from Rich Henderson on Bloomberg dot Com.
Today's episode was recorded on the traditional lands of the
will run to read people. It was produced by Paul
(14:02):
Allen and edited by Chris Burke and Ainsley Chandler. I'm
Rebecca Jones and I'll see you next week.
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