Private capital investment assets reach record $77bn

The Australian private capital industry reached a record $77 billion in assets under management at the end of June 2020 – despite the COVID-19 pandemic causing uncertainty across investment markets.

The new high is reported in the 2021 Preqin* and Australian Investment Council Yearbook released on 25 May.

Australian Investment Council chief executive Yasser El-Ansary said the latest data confirmed a global trend toward investment in unlisted capital markets.

“Investors all over the world want to be part of the massive value creation wave that is taking place in unlisted markets,” El-Ansary said.

The Yearbook analysis shows a 148% lift in assets held by private funds focused on Australian investment over the 10 years to 2020. Over the first six months of 2020 alone there was an 8.4% increase in Australia-focused private capital assets including private equity, venture capital, private debt, unlisted real estate, agriculture and infrastructure.

Private equity and venture capital registered four years of consecutive growth for the first time in ten years reaching $37 billion in combined assets under management including more than $13.5 billion in uncommitted capital available for investment.

Venture capital received a substantial boost in asset flows with a record $1.3 billion raised in the year to June 2020 – almost double the $735 million raised the prior year.

“This is strong evidence that Australia’s private capital industry is consolidating its position as a driver of Australia’s innovation economy through investment into businesses which are at the leading edge of technology and the new economic and jobs growth,” El Ansary said.

“One of the biggest themes coming out of the pandemic has been the push towards greater digitisation and investment in technology, and the depth of capital available to be deployed into businesses to accelerate that transition is growing every day.”

Fundraising for private equity was strong during the year to June 2020 with $4.3 billion in aggregate capital raised, almost x2.8 that of the prior year ($1.6 billion).

While the number of private equity deals was down on the prior year, aggregate value amounted to $14.8 billion. This was the result of sizable deals in the ‘consumer discretionary’ sector, which comprised 39% of private equity-sponsored deals by value (Virgin Australia, $$3.5 billion, Bain Capital; Village Roadshow, $758 million, BGH Capital) while ‘raw materials and natural resources’ comprised 16% (Thiess, $2.2 billion, Elliott Management) and ‘financial and insurance services’ transactions, 15% (Colonial First State, $1.7 billion, KKR).

“In the year ahead, we will see a significant lift in deal activity by private capital investors who will be able to play a lead role in helping to stabilise businesses disrupted by the pandemic, and to invest into sectors that need to go through phases of structural transformation to become stronger and more sustainable in the short and long-term,” El-Ansary said.

Preqin chief executive Mark O’Hare said: “The Australian private capital market has experienced record growth, boosted by a stable economic and political backdrop and attractive risk/return profiles.

“There is abundant demand from both domestic and international players – the industry’s adaptability and resilience, combined with Australia’s lead in sustainable investment practices, will ensure the future remains bright for the Australian private capital market.

*London-based Preqin collects and provides data on the alternative assets industry globally and works with the Australian Investment Council on compiling data for its annual Yearbook.

• 2021 Yearbook data highlights:
   

• $27 billion in uncommitted capital held by Australian-focused private capital fund managers, June 2020.
   
• $13.5 billion in total uncommitted capital held by Australian-focused PE and VC funds, June 2020 ($11 billion private equity, $2 billion venture capital).
   
• Australia-focused private equity and venture capital funds had a combined $37 billion in assets under management ($26.6 billion, private equity, $10.6 billion venture capital) as at June 2020.
   
• 169% increase in aggregate capital raised by Australia-focused private equity funds in 2020 compared to 2019.
   
• $8.3 billion aggregate capital raised by Australia-focused private capital funds in year to June 2020.
   
• $2.4 billion transacted in venture capital deals in Australia in year to June 2020, second highest total in 10 years.
   
• $224 million average size of private capital funds closed in year to June 2020.
   
• 50% of Australian private debt-backed deals in year to June 2020 focused on senior debt.
   
• 13.3% median net IRR of Australian-focused private capital funds (vintages 2011-2018).