Australian PE outperforms public market

Australian private equity distributions have outperformed returns from the country's top 300 listed companies during the fiscal year.

Australian private equity annualised returns outperformed the top 300 listed companies in Australia by 10 percent during the fiscal year from July 2011 to June 2012, according to a recent joint study by Cambridge Associates and the Australian Private Equity and Venture Capital Association.

Australian GPs distributed a total of A$2.3 billion (€1.9 billion; $2.4 billion) back to LPs, while drawing down A$1.6 billion.

The report also said that Australian private equity’s annualised returns increased 2.95 percent year-on-year net of fees.

The CA Index shows Australian private equity’s long-term results also remained relatively steady, with annualised returns of 9.08 percent, 1.76 percent and 6.6 percent over three-, five-, and ten-year horizons, respectively. This is in sharp contrast to the ASX 300 Index’s annualised returns of 5.56 percent, -4.15 percent, and 6.94 percent over the same horizons.

“Contrary to the idea that private equity performance numbers were artificially stabilised during the global financial crisis… we now have several years’ worth of post-crisis exit data, and it can be seen that private equity returns as a whole have consistently done well over the years compared to the listed markets on a net cash-on-cash basis,” Katherine Woodthorpe, AVCAL's chief executive, said in the statement.

And yet there were some areas where the ASX outperformed private equity – for example, returns in 2012 to date were 1.23 percent for private equity, but 3.13 percent for the ASX 300. Woodthorpe told PE Asia that such fluctuations are quite common in the public market – returns can go from high positive to a low negative in one year.

“The ASX is a far more volatile place to have your money,” Woodthorpe said.

Private equity showed some of these fluctuations, but they were not as extreme and were not concerning to researchers. “This minor volatility in distributions is not a concern as Australian private equity continues to deliver steady long-term value,” Eugene Snyman, managing director of Cambridge Associates in Sydney, said in the statement.

Foreign firms, however, haven't fared as well as domestic ones. CVC Capital Partners took a A$1.9 billion ($2 billion; €1.5 billion) loss in October, the largest ever private equity loss in Asia Pacific, when it ceded control of portfolio company Nine Entertainment, PE Asia reported earlier.