Private markets refer to investments that are not publicly traded and covers a diverse range of asset classes including private equity, private credit, venture capital, real estate, and infrastructure. At Fidante, we provide investors with access to best-in-class investment managers. We are one of Australia’s largest active investors, offering institutional grade private markets investment opportunities by partnering with leading investment teams globally.
Our investment managers are chosen for their robust investment processes, deep experience in navigating market cycles, and their commitment to achieving the best possible outcomes for investors.
Apollo Global Management, Inc. (Apollo) demonstrates strong alignment to investment outcomes by committing to invest from its balance sheet in the Apollo Aligned Alternatives Fund.1
Apollo is a global alternative asset manager with US$651bn in AUM.2
Apollo invests in private markets across equities, real assets, and credit with their size and scale allowing for opportunistic capital investments.
Ares has a robust team of over 1,000 investment professionals, with more than 50% focused on investing in credit markets globally.3
Ares is a global alternative investment manager with approximately US$447bn in AUM.3
Ares offers investors a broad platform for primary and secondary private credit solutions, backed by 20+ years of strong risk-adjusted returns through market cycles.
Challenger Investment Management Fixed Income (CIM), based in Australia, is a specialist in public and private credit markets providing flexible lending solutions to support a wide range of borrowers since 2005.
CIM are value investors, rotating between public and private credit to capture the best value whilst maintaining strict price discipline.
With over $16bn in AUM4, CIM’s credit portfolios benefit from rigorous, independent risk oversight.
Apollo Global Management, Inc. (Apollo) demonstrates strong alignment to investment outcomes by committing to invest from its balance sheet in the Apollo Aligned Alternatives Fund.1
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Apollo demonstrates strong alignment to investment outcomes by committing to invest 5% of its balance sheet in the Apollo Aligned Alternatives Fund.1
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Ares is a global alternative investment manager with approximately US$447bn in AUM.3
Ares offers investors a broad platform for primary and secondary private credit solutions, backed by 20+ years of strong risk-adjusted returns through market cycles.
Apollo demonstrates strong alignment to investment outcomes by committing to invest 5% of its balance sheet in the Apollo Aligned Alternatives Fund.1
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CIM rotates between public and private credit to capture the best value while maintaining strict price discipline.
CIM’s credit portfolios benefit from rigorous, independent risk oversight.
Why invest in Private Markets?
Private markets are currently thriving in Australia due to the potential for higher returns, attractive illiquidity premiums, and increased capital flow. Private market investments can offer appealing diversification opportunities beyond traditional investments like equities and bonds.
Investors are increasingly seeking private market opportunities for several key reasons. However, it’s important to recognise that these investments could include higher risks, such as limited liquidity and reduced transparency. It’s important to remember that considerations will vary depending on the specific type of investment and investment manager.
Illiquidity PremiumPrivate markets may provide an illiquidity premium that can enhance returns for investors who commit their capital for longer periods. Market conditions affect assets like private equity and private credit, but the illiquidity premium can help to boost returns. Potential for Higher ReturnsPrivate markets can offer the opportunity for higher returns compared to public markets, this may be driven by the potential for significant growth in early-stage companies, specialised sectors, or unique projects. DiversificationInvesting in private markets can provide valuable diversification away from traditional public equity and bond investments, helping to reduce overall portfolio volatility and improve risk-adjusted returns. |
Access to Unique Investment OpportunitiesPrivate markets can offer access to exclusive investment opportunities that are not available through public markets, including private equity, private credit, venture capital, real estate, and infrastructure. Less Market VolatilityPrivate investments are less affected by daily market fluctuations, with the potential for more stable returns over the long-term and reduced exposure to the short-term volatility commonly seen in public markets. |
How to Choose a Private Markets Manager
Selecting a private markets investment manager involves focusing on their proven track record, robust investment strategy, deep experience, and market knowledge.
With increasing demand for tailored investment solutions and diversification, it’s crucial to choose a manager who can navigate current market dynamics, manage risk effectively, and provide access to unique opportunities.
When selecting a private markets manager, it is important to consider the following factors:
Track RecordLook for an investment manager with a proven history of successful investments across various market cycles. Experience in structuring, negotiating, and managing investments through market cycles is important. Scale and Capacity ManagementIt’s important to assess how the manager handles growth and deal flow. Rapid scaling can lead to riskier investments if capital is deployed too quickly. Ensure the investment manager can maintain quality and diversification despite increasing capital. Portfolio DiversificationHaving access to a broad range of opportunities allows managers to leverage their experience and expertise in selecting the most relevant deals. This selection can provide diversification, mitigate risk, and provide overall portfolio stability. Team Structure and ResourcingEvaluate the team’s expertise and resources. A well-organised team with clear roles and succession planning is essential for managing a diverse portfolio effectively. |
Experience and Proactivity in Managing Distressed Assets and Workouts‘Workouts’ refer to the processes involved in managing and restructuring underperforming or distressed investments. For private markets, active management of underperforming investments or restructurings is vital. A proactive approach in dealing with challenges can significantly impact overall performance. Good GovernanceTransparency in fees, valuation practices, and operational processes is critical. An investment manager should be clear about fee structures and regularly update portfolio valuations to accurately reflect risks. The product offer documents will provide this information and detail how governance is managed. |
Portfolio Construction
Traditionally investors seeking diversification have implemented a 60/40 portfolio (60% equities, 40% bonds). In 2022, rising inflation and interest rate hikes led to significant losses in both equity and bonds, with US equities falling 18% and fixed income down 13%. This highlighted the need for diversification beyond traditional assets.
As correlation among traditional asset classes is rising, re-evaluating investment allocations is important for investors. Private markets provide a broader range of investment opportunities and incorporating these into portfolios can lead to better diversification and enhanced risk-adjusted returns.
Insights & Resources
Understanding Private Markets (40 secs)FAQs
1. What are private markets, private credit and alternatives?
Private Markets
Private markets are investments that are not publicly traded, including asset classes like private equity, private debt, venture capital, and real estate. These investments offer potential opportunity for higher returns and diversification beyond traditional public securities like bonds and equities.
Private Credit
Private credit refers to non-bank lending provided directly to companies, typically in the form of loans or debt securities. It may target middle-market companies or special situations, offering potentially higher yields compared to traditional fixed income investments.
Alternatives
Alternative investments encompass a broad range of asset classes outside traditional equities and bonds, including private markets, hedge funds, commodities, and real estate. These investments aim to provide diversification, risk management, and potential for higher returns by accessing non-traditional assets and strategies.
2. Who are the participants in private markets?
Borrowers
Borrowers are typically private companies, including startups, middle-market businesses, and established firms seeking capital for growth, acquisitions, or restructuring. These entities often turn to private markets for financing when they cannot access traditional bank loans or public capital markets.
Lenders
Lenders in private markets may include private credit fund managers and institutional investors such as pension funds and insurance companies. These lenders provide loans or credit directly to borrowers, often in exchange for higher returns compared to traditional bank lending due to the higher risk and illiquidity involved. They assess and select borrowers, structure deals, and manage the associated risks to deliver returns to their investors.
Companies Seeking Equity Capital
Companies looking for equity capital from private equity include businesses looking to grow, deleverage their balance sheet, sell an asset or take their company private. The size of these companies includes everything from startups to mature cash flow generating businesses that are looking for private ownership.
Private Equity Investors
Private equity firms provide capital to unlisted companies in exchange for an equity stake in that business. They look to grow these businesses by improving operational efficiencies, enhancing revenue opportunities, and reducing costs. After increasing the value of the acquired businesses and diversifying across a range of businesses, they look to realise returns through a sale or IPO.
3. What are the risks of investing in private markets?
Illiquidity
Private markets investments are typically less liquid than public securities, meaning they may be harder to sell or exit before the investment’s maturity or exit event, potentially tying up capital for extended periods.
Higher Risk
Due to the nature of private investments, particularly investments in startups or middle-market companies, there is often higher risk which can be exacerbated by their illiquidity compared to traditional public investments. This includes risks related to business performance, market conditions, and economic factors.
Limited Transparency and Information
Private market investments often lack the same level of transparency and regulatory oversight as public markets. Investors may have less access to detailed financial information and performance metrics, making it harder to assess the true risk and value of their investments.Investing in private markets involves several risks. Before deciding to acquire or continue holding a fund, you should carefully read the Fund’s Target Market Determination (TMD) and Product Disclosure Statement (PDS) to ensure that the key attributes described align with your objectives, financial situation, and needs.
4. How is liquidity managed and the liquidity mismatch addressed?
The liquidity mismatch in private markets highlights the gap between the illiquidity of investments and the liquidity needs of investors. To effectively manage this mismatch, investment managers employ a range of strategies and mechanisms, which are outlined below.
Investment Structuring
Private market investments are typically structured to align with the liquidity needs of investors. For example, funds may have lock-up periods, where investors commit capital for a set duration, allowing managers to invest in longer-term projects without needing immediate liquidity. Clear investment horizons and exit strategies are established to manage liquidity expectations.
Liquidity Mechanisms
To address liquidity concerns, private markets use various mechanisms such as:
- Secondary markets: Investors can sell their private market investments on secondary markets or through secondary fund transactions, though these are often less liquid and may involve discounts.
- Distribution streams: Investments are often structured with planned distributions over time, such as periodic income or capital returns, which can provide liquidity to investors as the underlying assets generate cash flow.
- Diversification and cash reserves: Private market funds often maintain cash reserves or invest in a diversified portfolio to manage liquidity. This strategy ensures that the fund has sufficient liquidity to meet investor redemption requests and operational needs while pursuing longer-term investment opportunities.
5. How are redemptions managed?
Redemptions in private markets are managed through several mechanisms including:
Lock-Up Periods
Capital is often locked in for a set time, preventing early withdrawals and allowing investment in illiquid assets.
Redemption Windows
Funds may offer redemption opportunities at regular intervals, such as quarterly or annually.
Liquidity Reserves
Funds maintain cash reserves or liquid assets to handle redemption requests without affecting their investment strategy.
6. Distributions — how frequently are distributions paid in private markets?
In private markets, distributions are typically paid less frequently than in public markets. The frequency of distributions depends on the specific investment vehicle and its structure which is outlined in the fund’s offer documents. Some common practices include:
Quarterly or Semi-Annually
Some private market funds make distributions quarterly or semi-annually, particularly if they involve income-generating assets or have ongoing cash flows.
Annually
Many private equity and venture capital funds distribute profits on an annual basis, aligning with their investment horizons and liquidity needs.
Event-Driven
Distributions can also occur on an event-driven basis, such as after a liquidity event (e.g. sale of an investment, IPO) or a scheduled milestone, which can be less predictable but potentially substantial.
7. How does a private market manager assess the value of their portfolio?
Private market managers may value their portfolios through the following methods:
Valuation Methods
Managers use techniques such as discounted cash flow (DCF) analysis, comparable company analysis, and recent transaction prices to estimate the value of investments. These methods help assess the worth of illiquid assets like private equity and real estate.
Periodic Reassessments
Valuations are typically updated quarterly or semi-annually to reflect changes in market conditions and asset performance. This regular reassessment ensures that the reported values are current and accurate.
Third-Party Involvement
Independent valuation firms may be engaged to provide objective assessments, adding credibility and accuracy to the valuation process. This helps mitigate bias and ensures reliable valuations for investors.
Insights
5 JUL 24 
Fidante
Australian private credit is booming… What should investors look out for?
Private credit is a growing asset class in Australia, with increasing interest despite moderating opportunities in the US. This article discusses the potential benefits of private credit.
17 JUN 24 Apollo
Building Resilience: Selecting the Right Assets for an Alternatives Portfolio
Volatility levels are rising and correlation among asset classes is making traditional portfolio diversification techniques less effective.
10 SEP 24 Fidante
Expanding the Investable Universe with Alternatives
Rising interest rates and tighter asset correlations are reducing traditional strategies’ effectiveness. For better returns and diversification, private markets may offer investors a promising solution.
12 JUN 24 Ares
Don’t Let Biases Towards Global Credit Overshadow the Opportunity
Ares highlights that while credit spreads and default rates are key metrics for evaluating credit markets, relying on a single number may overlook valuable opportunities in such a diverse market.
18 JUN 24 CIM
Private Credit: Ensombl Podcast
This episode explores the ins and outs of private credit, including the options available, the risks, its behaviour as an asset class, valuation and the role it can play within a portfolio.
Why Fidante?
Fidante is a global investment management business which forms long term alliances with best-in-class investment managers to provide investors access — across equity, fixed income, and alternative assets.
Our investment managers are chosen for their robust investment processes, deep experience in navigating market cycles, and their commitment to achieving the best possible outcomes for investors.
Fidante is proud to have been named Distributor of the Year at the Zenith Fund Awards for four consecutive years (2020, 2021, 2022 and 2023).
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info@fidante.com.au
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1. Apollo and its affiliates, including Athene Holding Ltd. (“Athene” and, together with its subsidiaries, the “Athene Group”) committed approximately $10 billion at inception, which may increase over time to the extent the Firm’s balance sheet continues to grow.
2. As of 30 June 2024. Based on AUM as disclosed in public filings.
3. As of 30 June 2024. AUM amounts include funds managed by Ivy Hill Asset Management, L.P., a wholly owned portfolio company of Ares Capital Corporation and registered investment adviser.
4. As of 30 June 2024.
Important Information
Apollo Aligned Alternatives Fund (ARSN 667 548 825) (the “Fund”) has been registered with the Australian Securities Investments Commissions (“”ASIC”) as a managed investment scheme under the Corporations Act 2001 (Cth). Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 (“Fidante”) is the responsible entity of the Fund and the issuer of the Fund. Fidante has appointed Apollo Management Singapore Pte. Ltd. (the “Manager”) as the investment manager of the Fund. The purpose of the Fund is to invest in Sub-Fund Apollo Aligned Alternatives (E-1), (the “Underlying Fund”). The Underlying Fund is managed by Apollo Aligned Alternatives Management L.P an affiliate of the Manager (the “Underlying Fund Manager” and, together with the Manager and their affiliates, “Apollo”).
Fidante is also the distributor of the Fund. As at the date of this email, Fidante is not a current direct client of Apollo, nor a current direct investor in the Fund; however, it is possible that Fidante, one or more affiliates of Fidante or employees of Fidante or its affiliates may be, or may subsequently become, a client of Apollo, or an investor in the Fund or in other Apollo-managed investment vehicles.
As Distributor of the Fund, Fidante is entitled to receive the following distribution fees from the Manager (i) a retail distribution fee of 0.25% of the net asset value of interests in the in Fund (other than in respect of certain excluded investors), (ii) an institutional distribution fee of 0.25% of the net asset value of both direct and indirect interests in the Underlying Fund attributable to wholesale clients introduced by the Distributor (the two fees applied without double counting). Fidante in its role of Responsible Entity, product issuer and administrator of the Fund is also entitled to receive a management fee out of the assets of the Fund equal to 0.25% (inclusive of GST and net of RITC) the Fund’s net asset value which will be borne by the Fund and not by the Manager. These fees incentivize Fidante to market the Fund but also give rise to conflicts of interest.
Apollo owns a minority interest in the ultimate holding company of Fidante; however, none of Fidante or its affiliates, officers, employees, shareholders or agents are officers, employees, members, partners or agents of Apollo or the Underlying Fund and may not be viewed as such.
Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 (Fidante) is a member of the Challenger Limited group of companies (Challenger Group) and is the responsible entity of the Fund. Fidante is the responsible entity and distributor of the Fund in Australia.
Apollo Management Singapore Pte Ltd (ARBN 635 094 914) (“Apollo Singapore”) is the investment manager of the Fund. Apollo Singapore is exempt under ASIC class order 03/1102 from the requirement to hold an Australian Financial Services Licence in respect of the financial services being provided in this jurisdiction to wholesale clients. Apollo Singapore is regulated by the Monetary Authority of Singapore under Singapore laws, which differ from Australian laws. The information in relation to Apollo and the Underlying Vehicles has been provided by Apollo and Fidante is not responsible for this information, including any statements of opinion.
The information in this material is general information only and is intended solely for licensed financial advisers or authorised representatives of licensed financial advisers and wholesale investors. It is not intended to constitute financial product advice or an offer, invitation, solicitation or recommendation to invest in the Fund and should not be used as the basis for making an investment in the Fund. This information must not be distributed, delivered, disclosed or otherwise disseminated to any investor. It has been prepared without taking into account any person’s investment objectives, financial situation or needs. Investors should consider whether the information is suitable to their circumstances. The Fund’s Target Market Determination and Product Disclosure Statement (PDS) available at www.fidante.com should be considered before making a decision about whether to buy or hold units in the Fund. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.
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Past performance is not a reliable indicator of future performance.
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This material has been prepared by Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 (Fidante), a member of the Challenger Limited group of companies (Challenger Group). The information in this material is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. Neither of Fidante nor any of its respective related bodies corporate, associates and employees, shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of the material or otherwise in connection with the material. It is intended to provide general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. Any projections are based on assumptions which we believe are reasonable but are subject to change and should not be relied upon. Past performance is not a reliable indicator of future performance.
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