Australian private equity funds produce the second-best returns after China amongst Asian private equity funds.
The Australian funds that manage $250 million or less have an internal rate of return of 18 per cent per annum over a decade, according to the Australian Private Equity & Venture Capital Association Ltd.
Access to money for buyouts in Australia remains robust. Japanese banks are providing finance for such takeovers where European banks once did.
Still, private equity accounts for just 3 per cent of all takeover activity in Australia.
Globally, there is too much private equity money seeking deals.
“There is a lot of dry powder. Purchase prices remain high,” says Erik Hirsch, chief investment officer of Hamilton Lane, a firm that invests in private equity on behalf of its clients.
Funds as old as six years are still seeking investments.
“The industry has work to do to get cash back to investors,” says Hirsch.
He says “there is a bit of a backlash today against the mega fund managers.”
Stock prices of listed private equity funds such as Apollo Investment Corp., Blackstone and KKR & Co. have not performed well because it has been “hard to get transparency” on their business activity and there is a “duration mismatch” between their investments and daily stock price movements, says Hirsch.