Activity have been robust despite moderating from 2022’s record highs
Assets under management (AUM) in Australia's private capital sector surged to $139 billion by June 2023 – a 33% increase from $104.5 billion at the end of 2021, reflecting a strong interest from both domestic and international investors in Australian ventures.
Financial data and insight provider Preqin and the Australian Investment Council recently released the 2024 edition of the annual Australian Private Capital Market Yearbook, which tracks activity in the private capital industry using Preqin data, as well as exclusive information obtained from Preqin and the Australian Investment Council’s teams.
Data from Preqin showed that in 2023, fundraising by Australia-focused private capital funds moderated from the record highs of 2021 and 2022, aligning with pre-pandemic norms at a total of $10 billion. A notable shift has been observed towards investing in fewer but more seasoned fund managers amid a global economic downturn.
The data also highlights a significant rise in the involvement of family offices in the Australian private capital market, with their participation soaring from 7% in 2019 to 36% in 2023. The number of family offices actively investing has also multiplied eightfold during this period.
The landscape for private equity firms has been challenging, particularly for leveraged buyouts, due to higher interest rates impacting margins. In 2023, the value of private equity-backed buyout deals in Australia was A$13.2 billion, a drastic drop from 2022, yet only 6.8% below the five-year average leading up to 2019.
Despite tougher market conditions, Australia’s venture capital sector remained vibrant, with 260 deals totalling $3.8 billion in 2023. Venture capital firms have shown a preference for early-stage investments, spurred by high funding costs and lower exit valuations.
The emerging private debt market in Australia also showed positive growth trends in 2023, driven by active deal-making and stringent lending standards among traditional lenders. The private debt AUM reached $1.8 billion as of June 2023.
“Despite difficult macroeconomic conditions, Australia’s private capital markets held up well,” said Angela Lai (pictured above), head of APAC and valuations, research insights at Preqin. “The strong track record of Australia’s VC ecosystem continues to attract global GPs and LPs. Fundraising and deal activity have been robust despite moderating from 2022’s record highs.”
Navleen Prasad (pictured upper right), chief executive of the Australian Investment Council, also emphasised the industry’s resilience in comparison to long-term averages, highlighting the importance of adapting regulatory and legislative frameworks to foster investment in startups and growth businesses.
“Private capital currently contributes three per cent to Australia’s GDP and, based on US and UK experience, has the potential to double that contribution, supporting the country’s growth ambitions,” Prasad said.
“The challenge for Australia, in a globally competitive market for patient capital, is to ensure that its regulatory and legislative frameworks remain efficient, effective and flexible enough to enable investment in start-ups and growth businesses. It is these businesses that will give Australia a more dynamic and future-proofed economy as well as supporting incumbent industries adapt to a changing world.”
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
