The outlook for private equity fund manager failures is less dire in Australia than it is in Europe and other countries, according to Australian Private Equity and Venture Capital Association (AVCAL) chief executive Katherine Woodthorpe.
“Generally speaking, we understand from Europe that the situation is far more bleak due to a mixture of factors including the greater impact of the global financial crisis compared to Australia,” she said.
A report commissioned by the association and released in May said despite the lull in deals over the last 12 months, many Australian private equity funds remain well capitalised.
Anecdotal evidence indicates banks are still willing to finance smaller transactions that involve appealing assets and private equity funds with a successful track record, it said.
Woodthorpe’s comments followed a report by London-based Coller Capital which said one quarter of private equity fund managers will fail as a result of the downturn.
Coller is an investor in private equity secondaries worldwide, with approximately $10 billion under management.
“Private equity investors (LPs) expect to see the disappearance of many existing private equity fund managers (GPs) … and a further deterioration in investment conditions in the near term,” Coller’s report said.
Investors also want improved transparency and risk management from fund managers, the report said. Over half of investors worldwide and as many as three quarters of LPs in the Asia Pacific think a significant number of GPs need to improve.
“The GPs will comply with their investors’ requests for information and transparency,” Woodthorpe said.
“AVCAL is working with the LP sector to try to standardise an improved level of reporting and as part of that process have introduced a new annual award for excellence in reporting, which is being judged by a panel of LPs.”
