PE industry hopes to lure super cash

Australia’s top private equity firms gather in Melbourne this week, hoping to win over greater commitments from the nation’s richest super funds.

Australia’s private equity (PE) industry is hoping to lure more investment from the nation’s superannuation funds, which have been growing rapidly but have slashed allocations to private equity in recent years.

Buyout firms including CHAMP Private Equity, Crescent Capital Partners and Anchorage Capital Partners will be talking to some of Australia’s biggest super funds at the private equity industry’s annual conference over the next two days.

The conference, hosted by industry lobby group Australian Private Equity and Venture Capital Association (AVCAL), has been moved from its traditional swanky surrounds at the Versace on the Gold Coast to Melbourne this year.

The main aim of the move south has been to make the conference more accessible for those large super funds based in Melbourne, AVCAL chief executive Yasser El-Ansary told Data Room.

“We expect to see 80 to 100 representatives from Australian and offshore pension and superannuation funds, which is tremendous,” said Mr El-Ansary, noting big super funds such as AustralianSuper, Cbus, HostPlus and HESTA would all attend the conference.

The funds flowing into the private equity sector from Australia's superannuation funds has dropped sharply in recent years, Mr El-Ansary said.

AVCAL estimates the total investment in the sector by super funds slumped from $634m in 2012 to $205m in fiscal 2013.

The decline in super funds commitment is partly due to the fact that super funds are coming under increasing pressure to cut fees and reduce costs, while private equity and venture capital tend not to be the low-fee asset classes, Mr El-Ansary said.

“Our challenge has been as an industry helping encourage the government and others to turn their mind to questions around net performance, as opposed to focus on fees and costs,” he said.

“We tend to operate with a higher-fee structure but from a macro perspective, the higher fee is more than offset by the fact that we particularly generate higher returns.”

Super funds also prefer to invest in liquid asset classes such as equities and bonds, whereas private equity and venture capital funds are typically highly illiquid, holding onto their investment companies for between three and seven years.

And the sharp growth in the size of many Australian super funds has made them too big to invest in many mid-sized PE firms. The smallest investment that the large super funds want to make will be $50m, $100m or even $200m, Mr El-Ansary said.

“Those numbers represent a fundamental challenge, because many of our largest private equity funds and certainly venture capital funds won’t necessarily be able to consume and accept a single investment from one investor of that sort of magnitude,” he said.

Australia’s total superannuation assets surged 15.3 per cent over the 12 months to June, to $1.85 trillion, according to statistics provided by the Association of Superannuation Funds of Australia (ASFA).

(Reporting by

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