The FY26 private market returns advisers should not expect twice

Advisers spent much of FY26 fielding client questions about private markets as though the phrase described one decision. The year’s returns make that reading hard to defend.

A review of 221 funds released in late August by Australian private markets firm FinCap found domestic private lending paid more than twice the return of cash, with almost no manager missing, while Australian private equity ran from a 57.4 per cent loss to a 12.8 per cent gain, depending on which fund the client happened to hold.

Ben Davis, head of portfolio and investment solutions at FinCap, says the year “rewarded discipline in one asset class and punished its absence almost everywhere else”.

Each fund in the review was checked against its own offer documents, and 167 of the 221 reported a return period covering at least 10 of the 12 months to 30 June 2026.

A credit year, and an unusually well-behaved one

Of the 104 lending funds in the review, 96 beat cash and only one finished the year negative. Real estate credit, the largest sub-class with 51 funds, recorded a median return of 8.8 per cent. Australian corporate and diversified credit followed at 8.5 per cent. Cash returned 3.86 per cent over the same 12 months, on FinCap’s figures.

The clustering carries more information than the median. The middle half of corporate credit funds landed within a band of 1.6 per cent, and property credit within 1.8 per cent. Australian private equity spread its middle half across 13.4 per cent, more than eight times as wide.

“An investor in Australian private credit earned a median around 8.5 per cent, with half of all funds landing within about 2 per cent of each other,” Davis says.

He traces the divergence to the engine driving each return. “Interest accrual is repeatable and converges, that is why credit funds cluster,” he says. “Valuation movement is not repeatable in either direction, and it is why the equity classes spread.”

Three funds, one listing window

The year’s highest returns came from late-stage global venture. StepStone Private Venture and Growth returned 41.7 per cent, Wunala Capital Emerging Opportunities 30.3 per cent and Potentum Partners Global Access 22.4 per cent.

The cause was specific and dateable. Private holdings became publicly priced before 30 June, SpaceX among them. Its shares began trading on 11 June at a valuation near US$1.75 trillion.

Those funds revalued something they already owned. No new income arrived, and three funds make a thin base for a claim about a category.

The same structural feature produced both extremes of the review. The worst result, a 57.4 per cent loss, came from one concentrated position inside a vehicle sold as diversified, and Wunala’s 30.3 per cent was also one concentrated position, marked above six times cost.

“Redemption terms, gating, gearing and concentration deserve the same diligence as the return target,” Davis says.

Why global credit looked worse than it lent

Global private credit returned a median 5.5 per cent against 8.5 per cent at home, which invites the conclusion that offshore lending simply earns less. The loan books say otherwise. They produced a coupon near 9 per cent with defaults flat. A quarterly mark to fair value produced the shortfall, and managers struck it in the quarter that AI fears repriced software lending, now around a fifth of global direct lending.

Domestic funds carried no equivalent mark. Australian investors gave up roughly 3 per cent at the median for global credit exposure, and bought in exchange a valuation regime that signals sooner when something has moved.

The marks have not met a credit cycle

The credit result deserves a harder look before advisers lift their allocations on the back of it. Managers struck those figures in a year of benign defaults, and a lending fund’s reported return rests on a judgement about whether its loans will be repaid in full.

“A tight band of reported returns is only as reliable as the marks underneath it, and in a lending book the mark is a judgement about whether a loan will be repaid in full.”

ASIC reached a related conclusion in REP 820, its private credit surveillance report, finding that the sector does not define arrears, impairment or default consistently enough for two funds’ numbers to mean the same thing. Two funds reporting 8.5 per cent may be describing different things.

Davis says FinCap will concentrate on valuation governance in private credit through FY27. Who strikes the mark, who reviews it, what independence supports it, and what a fund does when a loan stops performing.

“A manager who can answer those four questions in writing is a different proposition from one who points at a return,” he says.

The allocation most portfolios make by accident

Three Australian funds returned between 22 and 42 per cent because they held private companies that became publicly priced before 30 June. The pipeline behind that is real. OpenAI and Anthropic both filed confidentially for listings in June 2026, and Anthropic raised privately in late May at a reported valuation of US$965 billion.

“This is the live allocation question coming out of FY26, and most portfolios currently answer it by accident,” Davis says.

Four of the six highest returns in the review came from a valuation movement or a listing event that will not repeat. Advisers walking clients through FY26 statements now have a year of evidence behind a single question worth asking of every private markets holding. Where did this return come from, and can it happen twice?