Private equity funds in Australia raised a combined A$2.17 billion ($1.6 billon; €1.5 billion) in FY2016, 15 percent lower than the previous year’s A$2.55 billion.
However, this amount is still higher than the combined private equity fundraising recorded in FY2014 and FY2013 at A$933 million and A$720 million, according to a report from the Australian Private Equity and Venture Capital Association (AVCAL) and Ernst & Young.
Buyout funds accounted for the bulk of the dollar value of private equity fundraising at 71 percent. Notable fundraises included Pacific Equity Partners Fund V and CHAMP IV successfully raising over A$2 billion. Growth private firms such as Next Capital and Advent Private Capital also secured new investor commitments during the year.
Australian private equity firms received almost half of new commitments from US and Canadian investors, while Australian and Asian LPs committed up to 17 percent and 16 percent, respectively, the report noted.
“Domestic investors continue to be the foundation for the Australian PE industry, but increasing policy and regulatory focus will need to be addressed before domestic commitments begin to rise once again,” AVCAL chief executive Yasser El-Ansary said in the report.
In terms of investor composition, superannuation and pension funds were the biggest investors to the asset class (38 percent), followed by corporate and financial institutions (23 percent), and fund of funds (10 percent). Family offices, endowment and private individuals comprised the remaining 29 percent.
Meanwhile, total private equity investment grew by 2 percent to A$3.33b in FY2016, driven by an increase in the total amount invested by domestic private equity funds. The average private equity investment sizes were also higher this year than in FY2015, increasing from A$35 million to A$58 million.
Consumer products, services and retail continue to be the sector favoured by private equity, receiving 33 percent of overall investment from domestic managers. Financial services came in next at 25 percent, followed by energy and environment at 17 percent, and healthcare at 16 percent. Some of the largest private equity deals of the year were in the financial services sector. Transactions in this sector include the purchase of GE Capital’s Australian and New Zealand consumer finance business for A$8.2 billion by a consortium made up of KKR, Deutsche Bank and Varde Partners and the secondary sale of financing company Alleasing by CHAMP Private Equity to Monash Private Capital.
On the other hand, venture capital fundraising activity increased to the highest level on record with seven funds raising a total of A$568 million for year ending 30 June 2016. According to the report, fundraising in the last two years reached A$894 million, larger than the total amount raised in the preceding six years, A$870 million.
Venture capital funds that raised new capital included Blackbird Ventures’ latest fund at A$200 million, OneVentures Innovation and Growth Fund at A$100m, and Uniseed and NAB Ventures, each with A$50m raised.
El-Ansary says this is a positive sign for the innovation ecosystem as a diverse range of investors, especially superannuation funds, are continuing to back early-stage companies through established VC funds.
“The federal government’s policy initiatives through the National Innovation and Science Agenda announced in December 2015, as well as new interest in the early stage sector by large corporates, have worked in tandem to encourage investors to think about allocating capital to this fast-moving and high-growth segment of the economy,” commented El-Ansary.