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Record PE investment driven by super funds

Record PE investment driven by super funds

Jessica Yun
— 1 minute read

Private equity and venture capital fundraising reached a 10-year high in 2016-17, driven in part by high levels of investment from Australian superannuation funds.

According to the latest annual yearbook by the Australian Private Equity and Venture Capital Association (AVCAL), Australian private equity and venture capital fundraising in FY2017 came to a combined total of $3.35 billion, representing “a level not seen since FY2007”.

Venture capital (VC) firms more than doubled the amount of funds raised since 2016, leaping from $568 million to $1.32 billion this year, while funds raised by private equity (PE) firms “remained steady” at $2.03 billion.

However, domestic funding of PE firms made a strong comeback, jumping from just 17 per cent in the previous year to 63 per cent this year.

“The majority of new PE commitments came from Australian investors, including super funds – a marked shift from the last financial year where the majority of capital raised came from overseas,” the yearbook said.

In particular, superannuation and pension funds were the top investor (37 per cent) in private equity, 90 per cent of which were Australian super funds.

“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,” said AVCAL chief executive Yasser El-Ansary.

“This is great news for Australia’s PE industry and could signal a shift in the medium- to long-term strategy of domestic institutional investors, seizing the opportunities presented by local private equity.”

The yearbook revealed superannuation funds upped their funding into venture capital “considerably” this financial year, up 11 per cent since FY2016 and accounting for 32 per cent of total funds raised by VC.

Other factors attributed to the high level of venture fundraising this year were the number of venture firms that completed fundraisings, which more than doubled.

The impact of government policy and “initiatives like the Biomedical Translation Fund – a core component of the broad-ranging 2015 National Innovation and Science Agenda” also boosted the funding surge, according to the yearbook.

“Looking ahead, 2018 is poised to be another strong year for investment across PE and VC, with a collective $7.69 billion of ‘dry powder’ ready to be deployed into promising high-growth businesses,” Mr El-Ansary wrote in the yearbook foreword.

 

Record PE investment driven by super funds
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