Private equity will be impacted particularly hard by the Alternative Investment Fund Managers directive and suffer “real pain” as a consequence, Jon Moulton, turnaround specialist and private equity veteran told delegates at the Australian Private Equity and Venture Capital Association’s Alpha 2013 conference on the Gold Coast.
The UK's connection to the European Union is one of the 101 reasons Australia’s private equity industry should “be happy” compared to the UK, he said.
“The EU produces meaningless, absolutely unreasonable junk in vast quantities and shoves it down the throats of the industry. The Alternative Investment Fund Managers [directive], which we are all trying to get to grips with, is written in a language of its own, makes no sense, is pure overhead for the industry and it's going to be a real pain in the future,” he argued.
The Alternative Investment Fund Managers [directive], which we are all trying to get to grips with, is written in a language of its own, makes no sense, is pure overhead for the industry and its going to be a real pain in the future
Jon Moulton, chairman, Better Capital
“We need to get out of the EU. We cannot persist being dragged along as a country by the European Union, which is absolutely intent on wrecking our economy… It is economic warfare by regulation.”
He continued by listing the challenges of operating in the UK economy – a weak leadership, excessive debt, unwillingness to restructure or liquidate failing businesses and low growth — and noted that the 10-year average GDP growth of the UK has been 1.39 percent, compared to 3.07 percent in Australia.
Moulton also took the position that Australian private equity returns are respectable versus Asian or some other markets, but are not necessarily compelling numbers.
Delegate Joe Skrzynski, founding partner of Australian private equity firm CHAMP Private Equity, hit back.
He said, “One of the things you have to take into account is the maturity of the Australian industry. The industry started much later than the US and the UK, so it is not surprising to find that there is a shake-out period as the [good GPs] come out on top and others fall away. I think we’re witnessing that right now.”
However, while Moulton took his point, he returned, “My experience of being around in the earlier days of the UK and the US was that the returns were much higher in the earlier days. It was easier. It is much easier when you’ve got much less competition.”