Australian Investors' Approach to Private Equity: Cautious Yet Positive

(April 14, 2011) — Australian investors are cautious yet optimistic about private equity, Australia-based research conducted by Preqin has shown.

According to the firm’s research, 34% of Australian institutional investors intend to make a commitment in 2011, while 31% will increase their allocation to the asset class and 32% are unsure as to when they will make their next private equity investment.

“The private equity market remains challenging, with investors around the globe maintaining a cautious approach to investment; Australian LPs are no exception,” Stuart Taylor, Preqin’s manager of Asia research, stated. “However, with just 3% of LPs stating that they will no longer invest in the asset class, it is clear private equity investments remain an important part of their portfolios. Just over one-third of these investors intend to make commitments this year meaning that fundraising will continue to be competitive, and those GPs seeking commitments from Australian investors will need to closely monitor the investment preferences and needs of those with capital to commit.”

The study, which consisted of interviews conducted with 33 institutional investors from across Australia during February and March 2011, found that in the long-term, 54% will maintain their private equity allocation, 25% will increase it, and 21% intend to decrease it. Furthermore, the results showed Australian investors view European-focused funds slightly more favorably than funds focused in the United States. According to the report, 71% are keen to invest in European-focused funds and 65% are seeking opportunities in the US.

The results follow similarly positive findings regarding private equity fundraising in the US. Earlier this week, Dow Jones figures revealed that private equity funds in the US secured $31.6 billion for 89 funds during the first quarter, more than double the $13.5 billion raised for 81 funds during the same period last year. Meanwhile, the data showed that while European firms collected $8.2 billion during the quarter, up 39% from the $5.9 billion raised a year earlier, the number of closings declined to 22 from 32.

In the venture capital space, which has struggled to regain its peaks from the late 1990s and early 2000s, Dow Jones found that funds in the US raised $7.7 billion in the first quarter of 2011, nearly doubling the $3.9 billion raised in the same period last year and the highest first-quarter total since 2001. European venture firms, on the other hand, raised $653 million for five funds during the first quarter, down from $1.3 billion raised for 13 funds during the same period in 2010.

Click here to see the new GC Australia — a sister publication to aiCIO — that focuses on the Australian superannuation and alternative fund industry, from a securities services perspective.