Australian private equity outperforms listed markets

Private equity and venture capital returns raced ahead of public markets in 2015 posting gains of 18.4 percent compared to 2.8 percent.

Australian private equity and venture capital have significantly outperformed listed markets in 2015, according to data from the Australian Venture Capital and Private Equity Association (AVCAL) and Cambridge Associates.

The Cambridge Associates Australia Private Equity & Venture Capital Index (CA Australia Index) posted a net-of-fees return of 18.4 percent, compared with the S&P/ASX 300 Index of just 2.8 percent over the same 12-month period.

On a 10-year and 15-year basis, private equity and venture capital have also performed better, recording almost double the return figures for public markets.

Some funds that have generated notable returns include PAG Asia’s first pan-Asian private equity fund with an internal rate of return (IRR) of 17.9 percent and Affinity Equity Partners’ third Asia-Pacific fund which showed a 12.6 percent IRR, according to the latest California Public Employees' Retirement System’s fund review document.

“Over the past three years, PE and VC funds have on average returned over 20 percent per annum net of fees,” Yasser El-Ansary, chief executive of AVCAL said. “That would be an excellent record of performance at any time, but especially when the market is experiencing low returns globally. As super funds and other investors look for high yield investments, these returns underline the contribution PE and VC can make to portfolios.”

Eugene Snyman, managing director at Cambridge Associates added: “Australian VC and PE have generated strong returns over time, especially over the last 12 months, with many funds achieving net of fees returns in excess of 1,500 basis points above listed markets. Diligence, patience, and skill in manager selection continue to be paramount to adding value in these alternative asset classes.”

The Cambridge Associates indices compiles data from 64 private equity and 25 venture capital funds investing in Australia and New Zealand, including fully liquidated partnerships, formed between 1997 and 2014. It uses quarterly unaudited and annual audited fund financial statements produced by fund manager for their limited partners.