The finding represents the largest increase of any Asia-Pacific country and reflects growing optimism towards alternative investments amid geopolitical and macroeconomic uncertainty.

State Street's fourth annual Private Markets survey gathered responses from 450 institutional investors globally, including 30 Australian respondents across multi-asset managers, private markets managers, pension funds and insurance companies.

Currently, six in 10 Australian respondents have 10 per cent to 30 per cent of their portfolio allocated to private assets.

Over the next three to five years, seven in 10 anticipate an allocation above 30 per cent, with four in 10 expecting to allocate more than 50 per cent to private markets.

"The 2025 survey results reflect confidence in private market assets and growing institutional readiness for alternative vehicles in the current macroeconomic environment," said Cleyde Hazell, State Street's Head of Australia Product Team.

"We are seeing increased interest in private markets assets that offer relatively low volatility compared to public markets," she said.

Hazell noted that uncertainty about the world economic environment from the new US administration's tariff policies and possible reciprocations from major trading partners is influencing institutions' investment strategies.

"Australian investors are responding to these structural and market shifts by embracing private markets and they are doing so more assertively than their regional peers," she said.

The survey reveals a significant shift towards retail-style fund vehicles, with 53 per cent of global respondents believing at least half of private market flows will come through semi-liquid retail products within one to two years.

This contrasts with 2024, when 51 per cent expected traditional institutional fundraising to remain the primary source of capital.

In Australia, about one-third of respondents expect retail will be the key channel for fundraising in the next two to three years, up from 17 per cent last year.

"It's encouraging to see institutions across Australia taking a leading role in expanding access to private markets," said Hazell.

"The rising interest in semi-liquid, retail-style fund structures is being driven by product innovation and better access to data, which are making these vehicles more attractive for long-term allocations," she said.

Private equity remains the most appealing private markets asset class for institutional investors across Asia-Pacific, with 75 per cent of regional respondents expecting to increase allocation over the next two years.

Among Asia-Pacific countries, Australian respondents (47 per cent) and Singapore (38 per cent) see private debt benefiting most from the growth of semi-liquid funds.

"Investors believe private debt is easily securitised and therefore will benefit greater from the growth of individual/DC focused semi liquid funds," said Hazell.

The survey suggests investors are becoming more quality-focused in their private market investments, with increased emphasis on due diligence and risk assessment.

Capital allocation is moving from emerging to developed markets, with Asia-Pacific institutions particularly looking at investment opportunities in North America for private equity and developed Asia-Pacific for private debt.

Willingness to invest in emerging Asia-Pacific showed the largest decline, with 14 per cent of respondents planning allocations in this market, down from 25 per cent in 2024.

Most Asia-Pacific respondents are either investing in (31 per cent) or planning to invest in (38 per cent) generative artificial intelligence and large language models for private market investments.

However, Australian institutions appear slower in adopting these technologies, with six in 10 respondents still in early, aspirational stages of adoption.

"While many APAC institutions are already unlocking the value of generative AI and large language models in private markets, Australian organisations remain in the early, exploratory stages," said Hazell.

"Our research shows that while interest is rising, adoption in Australia is notably behind regional peers, with many firms (40 per cent) still uncertain about return on investment," she said.

Despite slower uptake, around seven in 10 Australian organisations expect their technology spending to rise over the next one to two years.

The study was commissioned by State Street and conducted by CoreData Research in the first quarter of 2025.