Integrating private market investments into Managed Account portfolios

Alex Donald (Ironbark Investment Solutions), Chris Ogilvie (Invest Blue) and Alex Cousley (Russell Investments) discuss the challenge of integrating private market investments into investor portfolios.

Private markets — encompassing a broad range of unlisted assets, including private equity, private credit, venture capital, and real assets — are experiencing significant growth, both globally and locally. These assets provide investors with opportunities across a large and diversified investment universe, such as energy transition and infrastructure.

Today, private markets offer investors a compelling value proposition through historically enhanced returns, portfolio diversification benefits, access to innovation and key thematics, active value creation opportunities, reduced volatility, and inflation protection capabilities not readily available in traditional public markets.

It’s an asset class that appeals to Chris Ogilvie — Chief Investment Officer at Invest Blue — who confirms the growing appetite by clients for private market investments. Partnering with Russell Investments and Ironbark Asset Management, Invest Blue recently launched a diversified private markets SMA - the Cornerstone Private Markets Managed Portfolio - which took the business about 12 months to pull together.

By Jayson Forrest

Continued.....

The SMA has a 70/30 benchmark, with the ability to move to 60-80 per cent growth. There is an initial minimum investment of $25,000 to access this structure, but Invest Blue limits this SMA to qualified advised clients who have a minimum of $500,000 in investible wealth. In addition, private market investments are limited to 5-15 per cent of a client’s portfolio, depending on their individual risk profile.

“Private market SMAs have not traditionally been the domain of retail SMAs. Private markets have been an asset class that most people would acquire by being either high-net-worth, or gaining an exposure through industry funds or other diversified offerings,” says Chris.

“We recognised the advantages for our clients to access private markets where it was appropriate for them. We built this solution for a certain portion of our client base, which means it’s not available for every client, even though it’s been constructed with daily and monthly liquidity.

“That’s because there is always the potential for ‘lock-up’ (a mandatory period, often lasting 90 days to several years, during which investors are prohibited from redeeming, selling or transferring their shares or capital), which from a market perspective is almost certain, we just don’t know when it’s going to happen over a cycle. We also know there is the potential of a fund lock-up, which we ideally want to avoid.”

In a panel discussion on ‘Integrating private market investments into portfolios’ at the 2026 IMAP Portfolio Management Conference in Sydney, Chris says prior to the launch of Invest Blue’s SMA, advisers were left having to allocate to a particular private markets provider.

“It was a bit of a ‘throw at the stumps’ approach in terms of which provider you used and what exposure you got. That’s because not all private equity/credit managers are the same,” he says. “So, we wanted to make sure we could use private market investments in managed portfolios and do it in a way that makes sense for retail, super and pension clients. And that’s what we’ve done with our private markets SMA.”

According to Chris, an essential aspect of rolling out the SMA was ensuring the business focused on delivering a comprehensive education program around private markets to both advisers and clients. He adds this was essential because private markets are not suitable for every client or risk profile.

“We needed to ensure that advisers and clients understood that an illiquidity or lock-up event at some stage of their investment was almost certain. So, we built our SMA in a way that we could actually manage such an event. We are very aware of the need for the product design to work, the structure to work, the way we provide advice to clients works, and the reasons for using this structure has also got to work,” he says.

“This SMA is not for everybody. It’s targeted to those qualified clients looking for something in the private markets area. Now, we have the benefit of being able to provide private market investments in a managed accounts structure with all the benefits that provides.”

Chris is acutely aware that when investing in private markets, an illiquidity or lock-up event is almost certain to happen at some point during the investment cycle. Typically, that is likely to occur as a result of a market volatility event.

Invest Blue addresses the likelihood of a lock-up event by ensuring that the purpose of private market assets within a portfolio is not to fund liquidity or pension payments. Chris says this is an important part of the client education piece, ensuring that clients understand the long-term and illiquid nature of private market assets.

“With a market led event, you need to reinforce the importance for patience with clients, as private market investments are a long-term capital play,” says Chris. “There are benefits, such as the illiquidity premium, for having an exposure to private markets. We also believe the Efficient Frontier (a set of optimal portfolios that offer the highest expected return for a defined level of risk) moves slightly when you add a discreet exposure to private markets. However, the price you pay for these benefits means that occasionally, you’re not going to get access to your money as quickly as you need it.”

Alex Donald — CEO of Ironbark Investment Solutions — agrees, adding that a way to deal with a lock-up event is for advisers to remove affected assets out of the managed account, enabling clients to hold these assets outside of this structure, which allows advisers the opportunity to rebalance the portfolio.

Alex adds there are also ways an adviser can switch off some of the rebalancing functionality within a portfolio, enabling the manager to better manage the liquidity.

In relation to lock-up events, what worries Alex Cousley, CFA — Director, Senior Portfolio Manager at Russell Investments — are fund-specific events (an event that directly impacts an investment/fund). This is where Russell’s research teams kick-in, gauging the seriousness of the problem with the fund, like a change to personnel, or determining whether there’s a fund specific liquidity event (for example, a large adviser moving 5 per cent of the fund).

“By ascertaining the cause of the event, then that might motivate us to switch platforms and request that the underlying manager be removed from the SMA,” says Alex.

Chris adds that the advantage of having a diversified portfolio, where a client’s exposure to private markets is limited to 5-15 per cent in the SMA, means that of the nine underlying assets in the SMA, some of these assets are liquid and not in private markets. This means clients have access to some liquidity.

Russell Investments’ approach to building private market portfolios for retail investors is focused on strategic asset allocation (SAA) and how to achieve diversification in private markets — including private equity, private credit, infrastructure, liquid credit, and multi-strategy credit.

According to Alex Cousley, a fundamental part of the portfolio construction process is centred on research. Russell has a strong pedigree of manager research, including dedicated private equity and private credit teams, with each research team tasked with identifying the best opportunities in the market.

Alex says of the 9,000 funds globally that Russell looks at, the manager only invests in about 250 of these. However, there are constraints around fund selection, with funds having to be available on Australian platforms and also needing to have monthly liquidity (at a maximum).

“We believe this approach does provide Russell with considerable diversification across asset classes. There’s also probably less private credit than you would expect for a private markets portfolio. Part of the reason for that is the opportunity set. Generally, we think Australian private credit opportunities are not as good as the global opportunity set, which is largely not available in the Australian market,” says Alex.

“Similarly, with private equity, we’re focusing on global. We believe having a global diversified strategy makes a lot more sense than being locally focused.”

However, Alex acknowledges that investing in private markets doesn’t come without its challenges. With the illiquid nature of private markets and the risk of ‘gating’ (the possibility that a fund manager will temporarily suspend or restrict investors from withdrawing their money from a fund), he says it’s understandable that investors expect an illiquidity premium as compensation for that risk.

According to Alex, when Russell undertakes its modelling of capital market assumptions for private equity and private credit, the illiquidity premium for private equity is about 150 basis points (bps) per year and 80-100bps for private credit.

For advisers considering allocating to private markets, Alex Donald’s best advice is to first talk to firms operating managed portfolios, like Russell and Drummond, about how they handle private markets in their portfolios. This includes: what’s their capability; what type of investments are in their portfolios; and why include these investments. Advisers can then decide whether a private markets allocation is suitable for their clients.

 Invest Blue is an advocate of the managed portfolio structure, particularly now that it can access private market investments in a way it couldn’t do so before.

 “My advice to advisers is: would you rather work with a dedicated team of professionals who understand the complexities of SMAs and private markets, and who have processes and structures in place, or do you want to choose managers to allocate to individually yourself? I know which way we want to go, because it’s much easier to work with a dedicated team of professionals.”

Alex Donald is CEO of Ironbark Investment Solutions;

Chris Ogilvie is Chief Investment Officer at Invest Blue; and

Alex Cousley, CFA is Director, Senior Portfolio Manager at Russell Investments.

They spoke on the topic ‘Integrating private market investments into portfolios’ at the 2026 IMAP Portfolio Management Conference in Sydney.

The session was moderated by Nick Blue — Director, Strategy and Strategic Partnerships at BT.