Australia-based private equity (PE) and venture capital (VC) fundraising achieved record highs in 2018, with a new report by the Australian Investment Council revealing that local firms secured $30 billion in assets under management.
The Australian Investment Council’s 2019 Yearbook, which uses figures compiled by data provider Preqin, showed that the average size of PE funds closed in 2018 was up by 117 per cent compared to the previous year, securing an aggregated $6.6 billion in capital.
Of the $6.6 billion raised by 17 funds – $1.3 billion was raised by nine VC funds and $5.3 billion by eight PE funds.
Meanwhile, VC fundraising closed the year with $1.3 billion in capital raised. This marks the first year where total capital raised exceeded $1 billion.
The Australian Investment Council attributed the increase in PE and VC to the growth in the startup ecosystem and innovation policy reforms, which “helped stimulate the Australian VC sector and attracted significant capital commitments from both domestic and foreign sources.”
Australian Investment Council chief executive Yasser El-Ansary said the figures from the 2019 Yearbook indicated not only how attractive the Australian market is to local and global investors, but also how more businesses are choosing to raise funds through private capital rather than public markets.
“Private capital investment offers an opportunity to provide smart capital to privately-backed companies in a relatively low risk environment and the numbers prove we’re well positioned to do that,” he said.
According to the findings, the tech sector made up the bulk of total deal activity in both PE and VC deals, with deals heavily weighted towards the IT software and IT internet sectors.
But when it came to the value of private equity deals made, healthcare deals dominated, making up 45 per cent of total deals, by value.
From a regional perspective, Australia ranked as the sixth largest private capital industry in the region, despite its modest 2.8 per cent of the total. China dominated with a 66 percent share, followed by Hong Kong at 13 per cent and South Korea at 7 per cent.
In addition, buyout funds were the dominant player in the fundraising game, generating 79 per cent of total new fund commitments raised during 2018, the 2019 Yearbook revealed.
BHG Capital, which was a buyout fund, was the largest fund to close in 2018 at $2.6 billion, the Yearbook said.