Investment

Private wealth is the next great frontier

BY   |  WEDNESDAY, 15 JAN 2025    12:16PM

With wealth increasingly shifting towards individual investors, it is only natural for private equity to follow suit.

Looking at the generation of wealth globally, there is a clear shift happening. Wealth creation is moving from traditional pension funds and government pensions to individual investors. Australians are also investing in assets other than property. We are seeing a new wave of investors emerging and a growing interest in investments in shares, exchange-traded funds (ETFs) and more sophisticated investment solutions.

Wealthy Australians and their advisers are increasingly exploring alternative investments for better returns and diversified portfolios beyond traditional markets. There is no doubt that this trend will shape the financial landscape over the next 15-30 years-in ways we probably cannot yet even imagine.

Private equity on an upper trajectory

The private equity industry has grown substantially over the last 5-10 years. Initially, it was straightforward to engage with large pension funds through one-on-one conversations about collective pension schemes. However, as the industry has expanded, the need to tap into new sources of capital has also grown.

In Western countries, governments are gradually stepping back from providing pensions to individuals, resulting in a reduced pool of state-provided capital. In Australia, the ongoing push towards individuals building their own wealth through superannuation has resulted in the nation having a retirement savings pool that now sits in excess of $3.5 trillion.

Consequently, the wealth in these areas shifts quickly from government-managed to individual savings. This divergence creates an exciting opportunity for private equity to engage with individual investors.

We often refer to three pillars of wealth generation:

  • Pillar one-government pensions
  • Pillar two-workplace pensions
  • Pillar three-individual savings.