According to new data, published by Preqin and the Australian Investment Council, private capital AUM added 11 per cent in the six months from 31 December 2020 to mid-2021, following a vote of confidence from large investors including super funds.
The aggregate deal value of private equity buyouts reached $20.1 billion, 32 per cent higher year-on-year, while venture capital deals doubled from $3.9 billion in 2020 to a record $7.9 billion.
“Private capital continued to find new investment opportunities despite the disruption caused by border closures and the extended impact of the COVID-19 pandemic,” said Australian Investment Council Interim CEO, Jonathan Kelly.
The report also found that private equity and venture capital AUM grew at an average rate of 11 per cent per annum over the five years to reach $42.2 billion at the end of the 2020-21 financial year.
Moreover, uncommitted capital fell from $13.5 billion to $10 billion from the beginning to the end of the 2020-21 financial year, “reflecting a significant deployment of capital by these segments into Australian businesses.”
Commenting on the findings, Preqin head of research insights, Dave Lowery, said that Australia’s private market funds are very attractive to those seeking above-market returns, with Australia increasingly considered a desirable destination and hub for institutional investment.
In fact, Preqin data revealed Australian-focused funds that matured from 2012 to 2019 delivered median net returns of 17.8 per cent, topping North America, Europe, and the rest of the world. As a result foreign investors have grown more active in Australia over the past two decades from 18 per cent of investors to 49 per cent today.
Looking forward, private capital is expected to contribute significantly to Australia's economy.
“We believe that private capital will play a key role in the country's economic recovery, due to the sector holding $26 billion in available funds for investment," Mr Lowery said.
Additionally, according to the report, private debt was the fastest growing asset class in Australia with an AUM boost of 144 per cent recorded in the six months from December 2020 to June 2021.
The report predicted that, in the coming months, super funds’ allocation to private debt may increase relative to public markets as investors seek involvement in this asset class for the potential higher yields against a backdrop of higher inflation.
