Why we think boring is beautiful in our Private Equity portfolio

We’ve seen the artificial intelligence (AI) narrative whipsaw markets over the past few years. In early 2026, markets were trading near record valuations, with the MSCI World index’s composition continuing to reflect a heavy concentration in a handful of US AI infrastructure and technology names. Since then, there have been some meaningful swings in markets – in early June, the Philadelphia Semiconductor Index plunged 10% in a single session, and Nvidia shed over $300bn in market capitalisation in one day. In technology, the SpaceX IPO was a major event, priced at USD135 per share, rising as high as USD225 per share before falling below USD120 only weeks after listing.

Meanwhile, in the WAM Alternative Assets (ASX: WMA) portfolio, our private equity program has remained steady. We recognise that there are plenty of opportunities to generate strong returns from the AI infrastructure build out, and it remains an important theme across global markets. Our portfolio, however, presents quite a contrast. Our underlying managers have continued investing in robust, cash flow generative businesses, which we often describe as ‘boring’ businesses that we love. These are businesses that are easy to understand, operate in sectors that have existed for years, and are delivering strong compounding growth year on year. Their earnings do not hinge on a chip demand rumour or hyperscaler capex guidance - they hinge on everyday demand that does not shift with the news cycle. This deliberate contrast to the volatility described above is central to how we believe private equity should behave inside a diversified investment portfolio.

We believe a well-diversified investment portfolio should hold a range of asset classes, including listed equities, real estate, infrastructure, fixed income, natural capital and, importantly, private equity. Institutional investors have long been allocating capital to private equity; the Future Fund, for example, had a 12.7% allocation to Private Equity at March-26, AustralianSuper have around 7% in private equity within its high-growth options and plans to increase this, and OMERS, which is one of Canada’s largest pension funds, has around 18% of its portfolio allocated to private equity. So, why do institutional investors like the asset class?

• Active, hands-on management – private equity gives investors access to a fundamentally different opportunity set where value is created through operational improvement, capital structure optimisation and strategic repositioning.
• Illiquidity premium – the asset class has historically offered investors an illiquidity return premium in exchange for capital being locked up for years.
• Access to a more diverse universe of companies – with companies remaining privately owned for longer and with relatively low IPO activity, private equity offers access to businesses and sectors that public markets do not cover or that are underrepresented in public markets.

WMA’s private equity portfolio:

The WAM Alternative Assets Fund has an approximately 40% allocation to Australian private equity (alongside its exposure to real estate, infrastructure, private debt and natural capital). Examples of businesses held within the WMA portfolio are Bremick, a manufacturer and supplier of fasteners (e.g. screws, washers and rivets) and structural hardware (owned through Crescent Capital), FVS Fire Services, who specialise in maintenance and testing of fire alarms and systems in buildings across Australia (owned through Fortitude Investment Partners), and Fantastic Furniture, which manufactures and retails affordable home furniture (owned through Allegro Funds). Alongside these businesses, WMA also has exposure to over 20 other businesses, including Healthcare Australia (the largest outsourced provider of medical professionals in Australia), Retail Zoo (parent company of Betty’s Burgers and Boost Juice), Evnex and Scyne Advisory. What do these businesses have in common?

• Essential and recurring demand: Fasteners and structural hardware (Bremick) are used in buildings and manufacturing regardless of the economic cycle. Fire safety testing (FVS) is a legal compliance requirement for buildings, and healthcare staffing (Healthcare Australia) addresses a structural workforce need that does not disappear in downturns, as demand is virtually insensitive to the economic cycle.
• Tangible products and services in the physical economy: Each of these businesses makes, installs or tests tangible products, or provides essential services in the physical economy.
• Domestic businesses servicing the Australian economy: These are businesses that employ Australian workers and sell into local demand (and may expand overseas) and are therefore less exposed to global market sentiment.
• Genuine sector diversification: While many public equity indices are increasingly concentrated in AI or technology names, the WMA private equity portfolio spans industrials, consumer, healthcare, government advisory, industrials and financials.
• Founder or corporate carve-out origins, now under private equity ownership: Several of the businesses in the WMA private equity portfolio were originated from founder-led transitions or corporate carveouts. These are businesses that benefit from the capital, governance and operational expertise that our private equity partners bring, which public markets cannot always provide.

The two charts illustrate the contrast between concentration and diversification. The MSCI World Top 20, comprising the largest 20 companies by market capitalisation in global equities, is significantly skewed towards Information Technology (57%) and Communication Services (17% comprising Alphabet and Meta) sectors. Nearly 75% of the index’s most valuable companies sit in two sectors. By contrast, the WMA private equity portfolio’s top 20 holdings are more diverse – Technology makes up just 18% of the portfolio, while Health Care (27%) and Industrials (36%) make up over 60%. This illustrates both the diversification benefits that a private equity allocation, such as that WMA’s can add to a portfolio and the defensive nature of the sector exposure within the portfolio.

While public markets have spent the past few years reacting to AI headlines and mega-cap earnings prints, businesses held in WMA have kept doing what they do best. For WMA, our private equity program is designed to invest with what we consider to be Australia’s best private equity managers, who identify these businesses, assemble strong management teams, and help them grow. Meanwhile, we aim to provide our shareholders with exposure to a genuinely different, less headline-driven source of returns. In a market increasingly obsessed with the next AI trade, we think there is a lot to be said for boring businesses that deliver compounding growth year after year from sectors that have existed for decades and endured multiple market cycles.

For more information visit: (VIEW LINK) and (VIEW LINK)