Higher levels of fundraising and investment activity usnderscored a positive year for the Australian private equity (PE) and venture capital (VC) industry in FY2015, according to the latest Australian Private Equity and Venture Capital Association (AVCAL) and EY Yearbook.
Total PE and VC fundraising for FY2015 reached the second highest level seen in the last eight years, almost tripling the level recorded in the previous year.
The majority of new commitments came from overseas investors, with sovereign wealth funds now contributing 26 per cent of total new fundraising, which is more than superannuation funds and other investor types.
“New capital has been raised, and there is a pickup in the level of new investment activity across the industry,” said AVCAL’s Chief Executive, Yasser El-Ansary.
The numbers have been crunched…
Overall investment activity was higher in terms of the number of companies invested in and the dollar amount invested, rising by 5 per cent and 32 per cent respectively when compared to FY2014.
PE investment by dollar value in FY2015 was 54 per cent higher compared to the previous year, off the back of increased investment from both domestic and offshore fund managers.
VC investment was lower in dollar terms compared to FY2014, but this was in-line with expectations given the spike in last year’s data as a result of the US$250m investment into Campaign Monitor by US-based Insight Venture Partners. Importantly, total VC investment in FY2015 was still higher than it was in FY2012 and FY2013.
“The higher levels of fundraising and investment are very encouraging, and they underpin the efforts of fund managers to deliver significant value for the businesses they invest in, while also generating exceptionally strong returns for investors,” said Yasser.
Bryan Zekulich, EY’s head of Private Equity in Oceania believes that historically high levels of dry powder and strong global interest will continue to support increased investment activity in the Australian PE and VC markets.
“PE managers in Australia have been successful in finding and building businesses, and recent exits demonstrate the longer term investments made by PE are a productive and sustainable model. In addition, PE and VC’s continued support of Australian entrepreneurs will be a very important and valuable contribution to innovation and Australia’s future economic growth,” Bryan said.
Exit activity was lower compared to the previous year, with a total of 51 companies divested throughout FY2015. But a number of strong exits, including sales of post-IPO stakes held from previous years, has helped Australian PE/VC funds post net-of-fees returns of 23 per cent for the year ended 30 June 2015.