SA VC FORUM
John Brakey Division Director
MARCH 2005
ARE GATEKEEPERS RESTRICTING THE FLOW OF PRIVATE EQUITY ?
WHO ARE THE GATEKEEPERS ?
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THE MARKET
The “asset consultants” – the real gatekeepers o Mercers Watson Wyatt o Frank RussellJANA Investment Advisors o Frontier AON o Counterpoint Access Economics
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Mixed views on private equity Mixed views on domestic vs international
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Private equity consultants (domestic) • Quentin Ayers Macquarie • Wilshire Access Economics • Industry Fund Services Private equity fund of funds (domestic) • Macquarie Quay Partners • ING Wilshire • Industry Fund Services
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DO GATEKEEPERS RESTRICT FUNDS?
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FUNDRAISING IMPRESSIONS
Asset consultants probably restrict fund flows • To all alternative asset classes! Not just PE • Focus on liquidity • Focus on short term returns o J-curve is a problem • BUT: client driven!! o Member Investment Choice o Fund Choice Private equity “gatekeepers” probably restrict fund flows • Focus on MBO and expansion sector • Flight away from venture • BUT: to some extent, that’s our job! o Focus on very few funds (maybe up to 20)
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ARE FUNDS BEING RESTRICTED?
PRIVATE EQUITY FUND FLOWS
$2,500
$2,000
Capital Raised ($m)
$1,500
$1,000
$500
$1993 1994 1995 1996 1997 1998 1999 Year
Source: Venture Economics; Macquarie Funds Management
2000
2001
2002
2003
2004
2005
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RESTRICTIONS BY STAGE
2004 ($m) Early Expansion Buy-out Total
234
PRIVATE EQUITY FUND FLOWS
2005 ($m)
350
467
550
1565
1450
2266
2350
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THE PRIVATE EQUITY GATEKEEPERS
TRYING TO HELP
• • •
Passion for the asset class Problem at venture/early stage end Gatekeepers trying to help • IIF program – Towers Perrin, IFS (Wilshire, Macquarie) • Pre-seed Funds – IFS (Access, Macquarie) • NZ VIF – Wilshire • SAPE Program – Macquarie • Vic. early stage review – Quay Partners What can you do? • Returns – absolute priority for superannuation funds • Understand investor attitudes o Aust. better than other global PE mkts o AVCAL valuable here • Research o Economic benefits – growth rates, job creation o Productivity benefits o AVCAL extremely valuable here
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SUMMARY
• • •
Funds probably being restricted Gatekeepers doing their jobs Issues of education
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Sector will continue to grow (rapidly!)
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