Australian LP halts private equity investments

The Victorian Funds Management Corporation, which has existing private equity assets worth about A$1.2bn, has made redundant its private equity co-heads as it shifts focus to infrastructure investments.

The A$34.7 billion (€25.6 billion;$37.3 billion) Victorian Funds Management Corporation (VFMC) has ceased making new commitments to private equity in favour of increasing investments to infrastructure.

A spokeswoman said the shift was not because of underperformance, but overexposure to the asset class.

“Our clients believe we are overweight to private equity and underweight in infrastructure,” a VFMC spokeswoman said, adding that its clients currently preferred “income producing assets with yields linked to inflation” and returns for infrastructure matched their clients’ liability profile.

VFMC co-heads of private markets Andrew Strachan and David Brown have as a result been made redundant, although a team will remain to manage the firms’ existing private equity assets worth about A$1.2 billion. 

One market source told PEI the change in direction was “sudden”, while local Australian trade magazine Investment and Technology reported that as recently as six weeks ago the co-heads had been meeting with general partners overseas, believing they had board approval for up to A$150 million in fund commitments over the next three years. 

VFMC had a 3.7 percent allocation to private equity and has previously committed to fund managers including Advent Private Capital, CHAMP Private Equity and Goldman Sachs, according to sister data provider Private Equity Connect.

The spokewsoman said the Australian LP has no current plans to offload its existing private equity portfolio, and noted it could potentially make private equity investments once again in the future, depening on client appetite.

VFMC was established in 1994 by the Treasurer of Victoria, Australia to offer funds management services to the Victorian Public Sector.