Promising Outlook for Australasia-Focused Private Equity Funds – December 2014

by Allison Polchinski

  • 22 Dec 2014
  • PE

In recent reports, Australian economists stated that in Q3 2014, weaker-than-expected economic growth was observed and the Australian dollar fell to a four-year low. However, Preqin’s Funds in Market online service shows that the amount of capital secured this year by Australasia-focused private equity funds has already surpassed the whole of 2013’s total, with time still remaining until Q4 2014 comes to an end. In 2013, 24 funds exclusively focused on Australasia reached a final close, raising an aggregate $2.5bn, compared to 15 such funds amassing $2.9bn so far this year. As a consequence of fewer vehicles accumulating more capital, the average fund size of Australasia-focused funds increased significantly, from $120mn in 2013 to $208mn in 2014 YTD. 

The buyout strategy has dominated exclusively Australasia-focused funds closed in 2014 YTD, with the largest proportion (48%) of capital raised accounted for by this fund type, as shown in the chart below. Infrastructure and real estate follow, with 10% of total capital raised by each of these fund types. 

In 2014 YTD, an overwhelming 94% of capital raised by Australasia-focused funds was raised by GPs headquartered in the Australasia region. Meanwhile, the amount of capital raised by fund managers based outside the region has continued to decrease for the past four years, declining from 10% in 2010 to 6% in 2014 YTD. 

The largest fund of 2014 focused solely on Australasia is Quadrant Private Equity No. 4, a buyout fund managed by Quadrant Private Equity. The fund focuses on mid-market buyout investments across a diverse range of industries and held a final close on AUD 850mn (approximately $767mn) in March. The second largest Australasia-focused fund, Australia New Zealand Forest Fund 2, is a timber fund focused on forestry and environmental assets in Australia and New Zealand, which raised AUD 707mn (approximately $638mn) and closed in Q1 2014. 

Fundraising continues to look strong for the end of 2014 and heading into 2015, with 30 funds with a focus exclusively on Australasia currently in market, targeting an aggregate $6.8bn. The largest fund currently on the road is Pacific Equity Partners Fund V, a buyout vehicle targeting AUD 2bn (approximately $1.9bn), which held an interim close in July on AUD 1bn (approximately $939bn). Pacific Equity Partners’ previous fund, Pacific Equity Partners Fund IV, is the largest Australasia-focused fund raised from 2006 to today, closing on AUD 4.1bn (approximately $3.7bn) in 2008 with the same buyout strategy focus. 

Despite not reaching the heights seen in previous years, there are promising signs for Australasia-focused fundraising. The increase in the amount of capital raised by these funds, a rising average fund size and the presence of several funds currently in market, including a multi-billion vehicle which has already secured a significant amount of capital via its first close, indicate that the upward trend in Australasia-focused fundraising should continue through the end of 2014 into 2015.

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