As an emerging market, Australia weathered the storm of the financial crisis remarkably well, with minimal impact on its economy. With China’s economy experiencing a slowdown, however, Australia could find itself in a vulnerable position. The over-reliance on China as the country’s largest trading partner and other macro-economic themes, such as the fall in the price of crude oil, are growing concerns for Australia’s private equity performance in 2015. For some private equity firms, such economic conditions could present good opportunities to source deals in the Australian market. Earlier in the year, there were reports that KKR and Pacific Equity Partners (PEP) will be looking to add more Australian investments to their portfolio to take advantage of the situation. This blog will look at private equity fund managers in Australia to see who dominates the private equity scene.
Preqin’s Fund Manager Profiles online service currently tracks 124 fund managers headquartered in Australia. Over the past decade they have raised USD 31bn in aggregate capital and have estimated aggregate dry powder of USD 7.8bn to invest in new opportunities. As seen in the table below, PEP has raised the most capital in the last 10 years, with an estimated USD 1.2bn in reserves which could be deployed later this year. PEP is also in the market raising fresh capital for its fifth buyout fund, Pacific Equity Partners Fund V, which has a target size of AUD 2bn. The fund is half the size of that of its predecessor, Pacific Equity Partners Fund IV, but has already reached its halfway point, securing a first close of AUD 1bn in July 2014.
Of these 124 Australia-based fund managers, 26% are buyout private equity firms, PEP included, while 44% offer venture capital as a primary investment strategy. These venture capital-focused firms have approximately USD 648mn of uncommitted aggregate capital. As observed in an interview with Yasser El-Ansary, Chief Executive of AVCAL, featured in the Preqin 2015 Global Private Equity & Venture Capital Report, venture capital funds managed by domestic and international private equity players are raising more capital than ever before.
Among Australia-based early-stage investors, Southern Cross Venture Partners has raised the most capital over the past decade, totalling USD 391mn, and has estimated dry powder of USD 138mn. Although headquartered in Australia, the firm has a wider geographic focus, looking at China and the US as well as domestic investments.
Of the 124 GPs, 18% have funds currently on the road with an aggregate target size of USD 6.2bn. Of this total, 73% will be directed towards Australia, a strong indication that domestic fund managers are confident in finding lucrative investments in their home market.