By Nick Kelly, Portfolio Manager, Wilson Asset Management.
Self-directed investors often take a very different approach to alternative assets than institutional funds do. While Australian superannuation funds typically carry a meaningful allocation to real assets, self-managed super fund (SMSF) portfolios tend to remain far more concentrated in listed shares, cash and direct property.
The latest SMSF statistics highlight this trend. As at December 2025, roughly 73% of all SMSF assets were held within just five categories: listed shares (27%), cash and term deposits (17%), unlisted trusts (12%), non-residential property (10%) and limited recourse borrowing arrangements (7%), according to ATO data.
This concentration has not been a problem during a prolonged bull market in equities, but it does mean many SMSF portfolios carry exposure to a narrow set of risks. Though no asset is entirely immune to the broader economic cycle, alternative assets introduce differentiated return drivers that can help create portfolio resilience when traditional asset classes face drawdowns.
What are alternative assets?
Alternative assets are, at their core, investments that sit outside the traditional public markets of listed stocks and bonds. For us at Wilson Asset Management, this category spans private equity, private debt, real estate, infrastructure and natural capital.
Why the attention now?
Large institutional investors have long allocated capital to alternative assets, seeking diversification, inflation protection and exposure to sources of return that differ from listed equities and bonds.
Retail and wholesale investors, by contrast, have remained heavily concentrated in listed equities and bonds. This is largely because access to private and real asset markets has historically been limited to large institutional investors with the scale, patience and governance frameworks to invest. Subsequently, adviser-directed and self-directed portfolios often remain structurally under-diversified.
Alternative assets can help bolster portfolio diversification because their return drivers are genuinely different from those of listed equities and bonds. They allow investors to access a different set of structural premia, such as inflation-linked cash flows, the illiquidity risk premium and others. Importantly, these are operationally intensive assets such as private companies and infrastructure assets, and their performance is highly dependent on active management.
These asset classes are also benefiting from powerful structural tailwinds: in 2026, institutional investors have been targeting real assets that benefit from secular themes such as digitalisation, decarbonisation and demographic changes.
The role of alternative assets in portfolios
Alternative assets earn their place by delivering several key benefits to a portfolio.
- Income generation: many strategies generate a reliable yield from rents or usage fees, which can be attractive for investors transitioning towards drawdown or needing a reliable source of income.
- Inflation protection: many regulated and contracted assets, together with assets under long-term leases frequently embed inflation-linked pricing, so revenues rise with inflation rather than being eroded by it.
- Portfolio diversification: because returns differ from those of listed equities and bonds, some alternative asset sectors have historically exhibited lower correlations with public markets.
- Operational alpha: Private equity, real estate and infrastructure managers can take active control of assets, driving value through operational improvements, strategic repositioning and management changes.
- Illiquidity premium: Investors giving up the ability to trade daily are typically compensated with higher expected returns. This applies across private equity, private debt and real asset strategies where capital is often locked up for a period of time.
What to look out for
While the benefits of alternative assets are compelling, investors should always weigh the trade-offs. Unlisted investments offer periodic and capped withdrawals, so these investments should be treated as long term and cannot be dynamically allocated to.
Valuations of the underlying assets rely on periodic appraisals rather than live pricing, so reported values can lag listed markets, and gearing can amplify both gains and losses.
Fees also tend to be higher than for listed products, and in fund-of-funds structures investors should understand the total cost across both layers. Transparency is therefore critical. And finally, manager skill drives outcomes far more than in efficient listed markets. The dispersion between top and bottom quartile managers in private markets is significantly wider than in public equities, indicating how critical manager selection is in alternative assets.
Ultimately, a portfolio built solely on listed shares, cash and property carries a narrow set of risks. A disciplined allocation to alternatives backed by careful manager selection builds the resilience that concentration can’t.
Join WAM Alternative Assets (ASX: WMA) Portfolio Manager Nick Kelly and Investment Director Martyn McCathie when they visit investors later this month for our 2026 Meet the Manager presentations.
Register here:
