Australia opens new channel of PE funding

Inclusion in the significant visa programme could unlock hundreds of millions of dollars for the industry

Private equity and venture capital funds in Australia will be open for investment from high net-worth individuals from overseas under the significant investor visa programme going forward, a move welcomed by the Australia Private Equity and Venture Capital Association (AVCAL).

Under the significant investor visa programme, high net-worth individuals from overseas are granted visas to live in Australia in exchange for investment in a variety of asset classes, but not in private equity. 

However, Australia’s trade and investment minister Andrew Robb said today that where the asset class had previously been excluded from the list of potential recipients of this capital, growth private equity funds and venture capital funds will now be included.

The move is good news for the industry, which has had channels of funding increasingly blocked off in recent years due to tightened regulatory constraints and shifting mandates of domestic superannuation funds to offshore managers. 

Moreover, AVCAL said earlier the industry was potentially missing out on hundreds of millions of dollars in capital commitments from overseas high net-worth individuals due to the exclusion of the asset class from the programme.

Wealthy individuals must invest a minimum of A$5 million ($4.5 million; €3.3 million) in the country to be eligible for a visa and the regime has so far generated large sums of money. Between September 2013 and March 2014, A$580 million was invested in Australia by overseas investors under the programme, AVCAL chief executive Yasser El-Ansary told Private Equity International earlier.

“Australian early-stage companies have, for many years now, been increasingly squeezed for capital owing to many traditional institutional investors decreasing their exposures to higher-risk ventures over time,” Kar Mei Tang, AVCAL’s head of policy and research, said, commenting on the new regulation. 

“Every year, Australian venture capital and private equity managers see a strong pipeline of startups, research-driven ventures and innovative small businesses that have the potential to be our future economic drivers. But many of these promising businesses and entrepreneurs struggle to secure funding because that kind of risk capital is in such short supply here in Australia.”

“The government’s move to reform the significant investor visa rules to channel new investment capital to venture capital and small business is a welcome move. Even if a small proportion of these funds are invested into Australian venture capital to back more commercialisation activity, this will be a good start towards helping to grow the 'D' in 'R&D',” he added.