Super Funds Driving PE Growth: Report

Superannuation funds' appetite for domestic private equity investments has reached new heights not seen since 2007, a new industry report shows.

Australian superannuation funds ploughed $676 million of capital in private equity over the 2017 financial year, according to the Australian Private Equity and Venture Capital Association's (AVCAL) Yearbook.

Funding from domestic sources increased to a whopping 63% from 17% when compared to the prior corresponding period, the report said.

Super funds - together with pension funds and fund-of-funds - drove private equity fundraising, comprising 58% of the total capital raised of $2.03 billion.

Over a third (37%) of the private equity capital raised came from superannuation and pension funds, albeit the majority (90%) of inflows originated from Australian funds, followed by fund-of-funds (21%) and sovereign funds (19%).

Venture capital fundraising also surged to a record level of $1.32 billion; 42% was allocated to the technology sector. Super funds, the public sector and high-net-worth individuals were the top three investors, the report noted.

AVCAL chief executive Yasser El-Ansary said the figures partly reflect Australian superannuation funds' increasing attraction to private equity opportunities within the market, supported by the consistently strong returns delivered by the broader industry over the past decade or so.

"We've also seen an increase in PE investments made in Australian businesses, up from $2.74 billion in FY16 to $3.26 billion in FY17. This is good news in terms of job growth and contribution to broader economic measures, particularly at a time when general business investment has been subdued," said El-Ansary.

"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."

AVCAL analysed 86 venture capital and private equity firms, with $29.6 billion in funds under management.

By Karren Vergara

Financial Standard

16 November 2017

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