5678.0 - Venture Capital and Later Stage Private Equity, Australia, 2011-12 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 14/02/2013   
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SUMMARY OF FINDINGS


INTRODUCTION

Investors in Venture Capital and Later Stage Private Equity (VC&LSPE) are generally sophisticated individual investors or institutional investors such as pension (superannuation) funds. Investors invest in VC&LSPE vehicles which are mainly organised in the form of either trust funds or corporations. VC&LSPE trust funds obtain investment commitments from investors, which are drawn down over time. They must return capital plus profit (minus loss) as investments are realised. VC&LSPE vehicles organised as corporations are able to choose to make distributions to investors (including parent corporations) or to retain capital for further investment. Investors in corporations may liquidate their investment by sale on the secondary market.

There are two types of VC&LSPE investment vehicles: direct VC&LSPE investment vehicles which generally place investments directly in investee companies; and vehicles that pool funds and generally place investments with direct VC&LSPE investment vehicles. These are called fund of funds.

The investment decisions of the vehicles are made by a VC&LSPE manager, who is generally a skilled business person and financial analyst. The VC&LSPE manager provides assistance and advice to the investee companies.

The usual relationship between the investors, managers, vehicles and investee companies is shown below. While this represents the usual relationship, variations can occur e.g. a fund of funds may co-invest with another fund manager.

Diagram: Introduction


OVERVIEW

The value of funds committed to VC&LSPE investment vehicles increased during 2011-12. As at 30 June 2012, investors had $17,212m committed to investment vehicles, a rise of 10% on the $15,631m committed as at 30 June 2011. Most of the committed funds were sourced domestically, with 87% of commitments from Australian investors (residents) down from 91% as at 30 June 2011. The value of funds committed by non-residents rose $805m (56%). Resident pension funds contributed $9,330m to total committed capital (54% of total funds committed).

All investors had $12,407m of committed funds drawn down as at 30 June 2012, which was an increase on the $12,088m (2.6%) of committed funds drawn down as at 30 June 2011.

As at 30 June 2012, $4,805m of committed funds were yet to be called on, up 36% on the undrawn commitments as at 30 June 2011. The $4,805m of undrawn commitments can be classified by preferred stage of investment, with only $541m undrawn by funds which prefer to invest at the earlier stage.

The value of investments by VC&LSPE investment vehicles ($7,066m in 792 investee companies) fell 19% on the $8,700m reported as at 30 June 2011. Investments in these 792 investee companies were reported by 239 vehicles.

The value of investments as at 30 June 2012 represented 0.48% of GDP, down from 0.62% of GDP at 30 June 2011. Both proportions of Venture Capital investments (0.12% of GDP) and Later Stage Private Equity investments (0.36% of GDP) fell as a proportion of GDP in 2011-12.

Value of Investment by VC & LSPE Investment Vehicles

2009-10
2010-11
2011-12
VC
LSPE
Total
VC
LSPE
Total
VC
LSPE
Total

Value of Investment ($m)
2 772
6 140
8 912
r1 995
r6 706
r8 700
1 827
5 238
7 066
GDP(a) (%)
0.21
0.48
0.69
0.14
0.48
0.62
0.12
0.36
0.48

r revised
(a) In calculating, VC&LSPE ratios, the most recently published annual GDP values (current prices, original series) were sourced from Time Series Spreadsheet Table 32 of Australian National Accounts: National Income, Expenditure and Product, Sept 2012 (cat. no. 5206.0), released on 5 Dec 2012.


During 2011-12, the net value of all exits through trade sales, Initial Public Offers (IPOs) and buybacks amounted to $1,696m, up 19% on 2010-11.

The 117 VC&LSPE managers reviewed 4,489 potential new investments during 2011-12 and conducted further analysis on 445 of those, with 94 (2.1% of total reviewed) being sponsored for VC&LSPE.

The following diagram summarises key findings for VC&LSPE as at 30 June 2012.

Diagram: Overview

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