Private equity remains an important asset class to superannuation funds
Zurich, Switzerland, April 15, 2008 – Australian superannuation funds remain committed to investing in private equity despite recent global market turmoil, a University of New South Wales survey has found.
The findings of the survey of major Australian superannuation funds and comparable institutions found that private equity commitments currently are and will remain about 6% of total assets. Since the last survey held in 2005, this allocation level grew from 4.5% of total assets.
Return and diversification benefits were the major desired objectives for private equity investment, although survey participants have indicated they will move away from US and Australian equities in favor of other regions, such as Asia.
The findings were drawn from a survey of 40 major superannuation funds about their attitude to private equity investment by John Evans, Associate Professor at the School of Actuarial Studies at the Australian School of Business at the University of New South Wales.
Europe’s largest independent private equity fund manager, the Zurich-based Adveq Management, sponsored the study.
Other key findings from Associate Professor Evans’ survey include respondents looking for a 11.6% p.a. nominal return from private equity investments (down from 16.5% expected in Assoc. Prof. Evans’ 2005 survey) and an outperformance of publicly listed equity of 3.4% p.a.
The technical skills of the equity manager were seen as the most important selection criteria.
The respondents were reticent about the relative performance risk of equity investment, along with the lack of transparency in the sector. However, these factors were not regarded as extreme.
Other trends to emerge since the last survey in 2005 include an increase in the use of fund of funds managers and a significant drop in allocation to Australian private equity.
The total funds under management of the respondents to the survey, conducted during March 2008, were more than AUD 250 billion.
“In Australia, superannuation funds are a major source of capital for the development of the economy, with assets about AUD 1 trillion and growing rapidly,” Associate Professor Evans said.
“The study was aimed at establishing what were the attitudes of the major superannuation funds to private equity investments and was a follow-up to an initial study conducted in 2005.”
The survey was one in an on-going series of studies sponsored by Adveq with the view to improve the level of information regarding the attitudes of institutional investors to private equity worldwide. Adveq has already engaged in similar studies in several countries in partnership with the Kyoto University, the Stockholm School of Economics, the University of St. Gallen, Nottingham University Business School, the University of Tilburg and the University of Applied Science Wiesbaden.
Peter Laib, Managing Director of Adveq put the results in an international context: “With a return expectation of 11.6%, Australian institutions have come back to a realistic level comparable to the assessments of investors in other countries.”
“Over the last years, in the extremely attractive debt environment, many managers have achieved returns of more than 30%. This level is hard to be maintained. However, based on the potentially lower entry prices for transactions in the investment vintage years to come, private equity may still offer very attractive returns to investors. This is especially true of the smaller segments of the market as well as fast growing regions like Asia”, Peter Laib commented.
About Adveq
Headquartered in Zurich (Switzerland), with USD 3.5 billion under management, Adveq is one of the leading private equity fund of funds investment managers globally. The company was founded in 1997, employs a staff of 60 and operates offices in Zurich (Switzerland), Frankfurt (Germany), New York (US) and Beijing (China). In Australia, Adveq is represented by Shed Enterprises. Almost all of Adveq’s investors are international institutions which benefit from Adveq’s global network of over 120 premier fund managers worldwide.
Further information
Peter Laib
Managing Director
Adveq Management AG
Affolternstrasse 56
CH-8050 Zurich
Telephone: +41 (0)43 288 32 00
Fax: +41 (0)43 288 32 10
E-Mail: peter.laib(at)adveq.com
www.adveq.com
