Domestic capital returns to Australian PE

Superannuation and pension funds re-emerge as the top investors in private equity in fiscal year 2017, reflecting increased investor confidence in the asset class.

Australian super funds deployed A$676 million ($513 million; €434 million) worth of commitments or more than a third of the A$2.03 billion raised by private equity firms in FY2017, according to the latest Australian Private Equity and Venture Capital Association 2017 yearbook released on Thursday.

Private equity funding from the investors jumped from 17 percent in the previous year to 63 percent in 2017, a marked shift from the last financial year where the majority of capital raised came from overseas, the report found.

“Over the past three years we’ve seen a steady increase in overseas funding and now it’s a welcome change to see the re-emergence of domestic funding sources,” Yasser El-Ansary, AVCAL chief executive said in the report.

Australian private equity and venture capital funds raised a total of A$3.35 billion in FY2017, a level not seen since FY2007 and significantly larger than the A$2.74 billion gathered in FY2016, the reported noted. This was largely because of record venture capital fundraising during the period.

Private equity fundraising, however, dipped slightly in FY2017, with 12 private equity funds securing an aggregate of A$2.03 billion, compared to A$2.17 billion in FY2016.

According to AVCAL buyout/later stage private equity funds were particularly successful, accounting for 61 percent of all capital raised. However, this made up just a quarter of the 12 funds which held closes during the year.

Firms that have had successful raises through the year ending 30 June 2017 include Quadrant Private Equity, which held a A$980 million first and final close on Quadrant Private Equity No.5 in August last year and CHAMP Private Equity, which closed on A$735 million on Champ IV in May this year. Meanwhile new firms such as Adamantem Capital and Odyssey Private Equity also secured significant investor commitments during the year.

As of 30 June, the industry recorded A$7.69 billion of dry powder, slightly larger than last year’s A$7 billion. “The numbers show that 2018 will also be a strong year on the investment front which will bode well for businesses seeking to benefit from the strategic and financial input of private equity,” Bryan Zekulich, EY Oceania leader, private equity.

In addition, private equity invested A$3.26 billion in Australian businesses during the period, of which more than 40 percent was invested in consumer products, services & retail space.