The Australian Venture Capital Association Limited (AVCAL) has unveiled its code of private equity governance, with Financial Services and Superannuation Minister Bill Shorten welcoming the move.
“Corporate governance is particularly important for private equity general partners, given their active role in the management of the entities they invest in,” Shorten said.
“As a growing and dynamic part of Australia’s financial services industry, I am keen to see private equity continue to improve Australia’s overall productivity and strengthen Australia as a financial services centre.”
AVCAL chief executive Katherine Woodthorpe said the governance code was an important milestone for the private equity industry.
“Formalising good governance practices by introducing the governance code means that we hold our industry up to high standards,” Woodthorpe said.
The code is based on seven principles, including a vow to promote and safeguard the interests of the fund’s investors, recognising the diverse nature of those interests and ensuring private equity participants are transparent in their dealings with other key stakeholders.
“The new governance code has been drafted with reference to other corporate governance codes around the world, including the ASX Corporate Governance Principles and Recommendations, to provide assurance to stakeholders that private equity firms are responsible stewards of their investors’ capital and of the businesses they invest in,” Woodthorpe said.
Australia’s private equity industry was shoved out of the limelight by the global financial crisis, but the sector’s performance has been commanding fresh attention.
Several months ago, the Cambridge Associates LLC AVCAL Index showed Australian private equity and venture capital investments outperformed the S&P/ASX 300 Index over one, three and five years.
Private equity’s effort to self-regulate comes amid government reforms elsewhere in the financial services industry.
The move dovetails with Shorten’s Future of Financial Advice reforms, an effort to make the financial advice industry more accountable to the public and, ultimately, convince more consumers to use advisers.
It also coincides with the Australian Prudential Regulation Authority’s recent Basel III guidelines, which would shore up the banking industry’s buffers against big lending losses and possible collapse.
