In an analysis published on InvestorDaily, Paul Mirren, managing director of Msquared Capital, said the fund’s investment in Pluralsight, initially labeled a private credit loan, turned out to be more of a venture capital gamble.

“If it walks like a duck and quacks like a duck, it is undoubtedly a duck.” Although it was originally a debt instrument, the debt was converted into equity when it could not be repaid,” Miron said.

He said this incident highlights the importance of using clear investment language, as mixing private equity with venture capital can seriously mislead investors about the real risks.

“It is not unusual for fund managers to use persuasive language and jargon to present certain opportunities as private credit, potentially giving the impression of lower risk. In this case, AustralianSuper was the largest investor and probably understood the level of risk,” Miron said.

“If the investment promoter had sought funds from a different pool of Australian investors, the potential for a significantly more negative financial impact on investors would have been much higher.

"This highlights the importance of due diligence on investment decisions and should serve as a stark reminder of the potential consequences of not doing so."

In a broader context, Myron said this failure points to a wider problem within the investment industry - the use of the term "alternative assets" to cover a wide range of investments with different risk profiles. This, he argues, can mask the diverse risk profiles that these assets actually carry.

Historically, Miron said, the definition of alternative assets stems from the modern portfolio theory of the 1950s, which lumped everything outside stocks and bonds into that category. However, today's complex financial products require a more nuanced approach.

While AustralianSuper's $1.1 billion write-down may seem like a drop in the ocean relative to its total assets, he warned it served as an important lesson for all investors.

“Private credit may be very fashionable right now, but it is not a homogenous asset class. Investors need to understand what they are investing in and how they can recover their investment when borrowers default.”