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5678.0 - Venture Capital and Later Stage Private Equity, Australia, 2012-13 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 13/02/2014   
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SUMMARY OF FINDINGS


INTRODUCTION

Investors in Venture Capital and Later Stage Private Equity are generally sophisticated individual investors or institutional investors such as pension (superannuation) funds. Investments in VC&LSPE vehicles 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 return net capital (original 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/or 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 2012-13. As at 30 June 2013, investors had $19,754m committed to investment vehicles, a rise of 3% on the $19,268m committed as at 30 June 2012. Most of the committed funds were sourced domestically, with 78% of commitments from Australian investors (residents) down from 80% as at 30 June 2012. The value of funds committed by non-residents rose $362m (9%). Resident pension funds contributed $9,578m to total committed capital (48% of total funds committed).

SOURCE OF FUNDS OF VC&LSPE VEHICLES(a)

2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
$m
$m
$m
$m
$m
$m

Commitments by investors
17 627
17 487
17 262
r16 546
r19 268
19 754
Drawdowns from investors
10 911
11 720
12 224
r12 216
r13 069
13 802
Unused commitment
6 716
5 767
5 039
r4 330
r6 199
5 952

r revised
(a) Closing balance of all VC&LSPE vehicles operating during the financial year


All investors had $13,802m of committed funds drawn down as at 30 June 2013, which was an increase of 6% on the $13,069m committed funds drawn down as at 30 June 2012.

Committed funds of $5,952m were yet to be called on, down 4% on the undrawn commitments as at 30 June 2012. These undrawn commitments can be classified by preferred stage of investment, with only $1,289m undrawn by funds which prefer to invest in companies in the venture capital stages.

The value of investments by VC&LSPE investment vehicles ($8,189m in 720 investee companies) rose 7% on the $7,652m reported as at 30 June 2012. Investments in these 720 investee companies were reported by 231 vehicles.

The value of investments as at 30 June 2013 represented 0.54% of GDP, up from 0.51% of GDP at 30 June 2012. Venture Capital (VC) investments (0.11% of GDP) fell whereas Later Stage Private Equity (LSPE) investments (0.43% of GDP) rose as a proportion of GDP in 2012-13.

VALUE OF INVESTMENT BY VC&LSPE INVESTMENT VEHICLES

2010-11
2011-12
2012-13
VC
LSPE
Total
VC
LSPE
Total
VC
LSPE
Total

Value of Investment $m
1 995
6 706
8 700
r1 827
r5 825
r7 652
1 707
6 482
8 189
GDP(a) %
0.14
0.48
0.62
0.12
0.39
0.51
0.11
0.43
0.54

r revised
(a) In calculating VC&LSPE ratios, the most recently published annual GDP values were sourced from the Time Series Spreadsheet Table 32 Australian National Accounts: National Income, Expenditure and Product, Sept 2013 (cat. no. 5206.0)- Gross domestic product: Current prices (original, derived, annual), series ID: A2304617J.


During 2012-13, the net value of all exits through trade sales, Initial Public Offers (IPOs) and buybacks amounted to $1,249m, down 27% on 2011-12.

The VC&LSPE managers reviewed 6,604 potential new investments during 2012-13 and conducted further analysis on 850 of those, with 76 being sponsored for VC&LSPE. These 76 new investments totalled $919m in value. In addition to this, 157 follow-on investments were made in existing VC&LSPE investments with a total value of $203m.

The following table summarises VC&LSPE investment activity over the last two financial years.

SUMMARY TABLE, VC&LSPE investment - 2011-12 and 2012-13

VC
LSPE
Both VC&LSPE
2011-12
2012-13
% change
2011-12
2012-13
% change
2011-12
2012-13
% change

New investments
Deals no.
67
51
-24
r32
25
-22
r99
76
-23
Value $m
r209
163
-22
r716
755
5
r924
919
-1
Follow-on investments
Deals no.
135
122
-10
41
35
-15
176
157
-11
Value $m
123
102
-17
127
101
-20
250
203
-19
New and Follow-on investments
Deals no.
202
173
-14
r73
60
-18
r275
233
-15
Value $m
r332
265
-20
r843
856
2
r1 174
1 122
-4
VC&LSPE proposals
Viewed(a) no.
2 548
5 515
116
1 941
1 089
-44
4 489
6 604
47
Further considered(b) no.
300
728
142
145
122
-16
445
850
91

r revised
(a) Number of investment proposals viewed by all VC&LSPE managers.
(b) Number of investment proposals that underwent further analysis by VC&LSPE managers, i.e. significant negotiations with owners, indicative bid made or due diligence undertaken.



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