Private market assets soar to record $80bn: Australian Investment Council

“Australia has had a long period of economic growth and returns from the private equity segments have been very strong,” said Jonathan Kelly, chief executive of the Australian Investment Council.

“The pandemic has impacted every business across the Australian economic landscape,” he said. “The private markets industry has a lot of capital to invest and can play a leading role in Australia’s recovery.”

The asset growth comes as investors attempt to bolster private market allocations in the search for above-market returns. Australia-focused private market funds that matured between 2012 and 2019 generated median net returns of 17.8%, according to data from Preqin.

The amount of so-called dry powder — money pledged to private equity and venture capital funds but not yet deployed — fell by a quarter in fiscal 2021 to $10 billion. dollars as deals materialized.

Super funds are among the largest players in the Australian private markets and typically invest through private equity fund managers, co-investments and debt investments.

The industry is also exploring new models that may include longer or shorter time horizons to lock in investor capital.

“The traditional 10-year closed-end fund is quite self-selecting. Many investments fit into this model, but certain asset classes and transaction profiles do not fit into this window,” Kelly said.

“These funds are maturing and increasing their sophistication in the market, allowing fund managers to target a wider range of opportunities.”

The fastest growing segment of private markets in Australia is private credit, where investors lend money to companies instead of companies that rely on the bond market or traditional lenders like banks.

Investment in private credit has exploded in recent years in the United States and Europe, but in Australia it represents only 2% of private market assets under management.

“There is definitely room to grow. As private credit companies become established and there are more of them, there will be a network effect in an expanding market and I think we will see this segment grow over time,” said said Mr. Kelly.