Australian Private Equity and Venture Capital: 'Coming of Age and Primed for Continued Outperformance'

Eugene Snyman – Managing Director, Cambridge Associates
Margaret Schlott – Senior Investment Director, Cambridge Associates

2019 Performance Highlights

  • Growing Industry: Australian private equity and venture capital represents nearly $30 billion of capital raised over 20 years across 108 funds – forming a well-established industry built on robust growth over time.
  • Strong Long-term Performance: Australian private equity and venture capital has delivered strong long-term net of fees performance for investors, achieving over 4% of outperformance versus the ASX 300 for the 5, 10, and 20-year periods ending 31 December 2019. Long-term performance of the local market has remained compelling among global peers.
  • 2019 Activity: Calendar year 2019 proved to be another active year for Australian private equity and venture capital investments with over $1 billion invested into Australian and New Zealand companies and distributions in excess of $1.2 billion, net of fees, returned back to investors during the year. Investments in industrials, IT, and healthcare sectors dominated activity during the year.
  • Snapshot of Australian Private Equity and Venture Capital in 2020: As we entered 2020, the Cambridge Associates Australian Private Equity (PE) and Venture Capital (VC) index represented $9 billion of current market value, with an estimated $5.7 billion in “dry powder” available for further investment into local companies. Consumer and healthcare sectors have continued to dominate investment exposures, representing over 57% of the current market value of the Index.

Growing Industry

Tremendous growth over 20 years has driven Australian private equity and venture capital (PE/VC) from a handful of funds operating locally in 1999 to a well-established industry today comprising of both local and global PE/VC firms. At the end of the 2019 calendar year, the Cambridge Associates Australian PE/VC Index represented $29.4 billion of capital raised by 108 PE/VC funds. Over the 20-year period of data captured by the Index the industry has invested $23.7 billion in Australian and New Zealand companies, returning $27.5 billion net of fees back to investors and still holding unrealised investments valued at $9.0 billion. While invested capital has grown 2.6 times since 2009, realisations have grown 6.2 times in the same period. The table below (Figure 1) reflects the 20-year growth of the local market into a well-established PE/VC industry.

Strong Long-Term Performance

Australian PE and VC demonstrates strong returns to investors across long-term time horizons, delivering double digit net of fees returns over 5, 10, and 20 -year periods (Figure 2). Over these same periods, Australian PE/VC managers in aggregate outperformed the ASX 300 Index by +4.3% to +6.1% and the ASX Small Ordinaries Indices by +2.1% to +9.5% on a public market equivalent (mPME) basis. To measure mPME, Cambridge Associates compares private equity performance to that of listed equities by hypothetically ‘investing’ in the ASX 300 and the ASX Small Ordinaries at the same time and equivalent amount as the private equity investments.

However, investors do not buy the index in PE and manager selection matters in performance results. The importance of manager selection is illustrated in the data gathered by Cambridge Associates which shows the top two quartiles of Australian PE/VC funds have delivered 19%+ annualised returns over 5, 10, and 20-year periods ending 31 December 2019 (22.6%, 19.2%, and 24.9% respectively net of fees and carried interest). This universe exceeds returns of the broad Australian PE/VC industry by +6.5% to +11.7% per annum over time.

Australian private equity and venture capital returns outpaced global peers in Australian dollars over 20 years (Figure 3). However, over 5 and 10-year periods Australian performance lags global PE and VC in Australian dollars. Some of the shorter-term performance can be attributed to currency impacts over these periods, as well as local market factors including interest rates and valuations. For example, when reviewed in local currency (USD) terms, US private equity and venture capital returned 13.7% and 15.6% for the 5 and 10-year periods, respectively. Nonetheless, Australian PE/VC performance is competitive among global peers.

2019 Year in Review

Private equity and venture capital performance is measured over the medium to long-term (5- to 20-year periods) to align performance with the strategy of acquiring and divesting investment assets. Measuring the industry cash flows over a 12-month period provides a snapshot of the year in review but is not a meaningful indicator for a long-term asset class.

During 2019, the Cambridge Associates Australian PE and VC Index returned 9.6% for the year, which lagged a 24.1% return from the ASX 300 Index public market equivalent as shown in Figure 4. It is important to note that 88% of net value creation for the year comes from PE/VC funds still within their investment period (vintage years 2014 to 2019), which includes recent vintage years (2017, 2018, and 2019) that are early in the investment period where returns are not yet considered to be meaningful.

This universe is historically dominated by buyout and growth equity strategies, representing 93% of total capitalisation, while venture capital funds represent 7% of the index by capitalisation. During the year, PE and VC returns were driven by industrials, IT, and healthcare and were tempered by performance in consumer staples and financials. Since its inception, over 80% of returns from the industry have been driven by investments in four sectors: consumer, industrials, healthcare, and IT. While the ASX 300 has been dominated by financials and materials, private equity has offered investors differentiated sector exposure and investments outside publicly listed companies.


The industry invested $1 billion into Australian and New Zealand companies during 2019. This is in line with prior years, which have averaged $1.3 billion per year (since 2009). In 2019, 72% of investment went into four sectors: consumer discretionary, healthcare, industrials, and materials. Nearly 80% of investment went to Australian companies, while New Zealand companies received 19% with the residual invested outside of the region – broadly in line with PE and VC investment between the regions over time.

Realisations and Distributions

Investors received net of fees distributions of $1.2 billion from Australian PE/VC managers during the calendar year 2019, lower than the average $2.3 billion per year since 2016. In total, 60% of distributions for 2019 came from fund vintage years 2012-2015 and venture capital delivered 15% of the 2019 distributions. Realisations from consumer sector companies delivered 70% of capital for the year, with an additional 23% of realisations resulting from investments in the healthcare and IT sectors.

Snapshot of the Industry in 2020 and Looking Ahead

Heading into 2020, the Australian PE and VC current market value stood at $9 billion at 31 December 2019. Buyout and growth equity investments represented 83% of asset values, with 16% in venture capital investments. The vast majority (88%) of the current market value is held by 2011- 2019 vintage year funds. Geographic exposures stand at 76% Australian companies and 16% New Zealand, with 8% invested outside of the region, predominately in the US. Consumer and Healthcare investments continued to be dominant exposures across the industry, representing over 50% of net asset value (Figure 5).

Performance data for the index in the March 2020 quarter will include early and initial valuation impacts of COVID-19. Of the $29.4 billion of capital raised by the industry to date, approximately $5.7 billion remains as estimated “dry powder”. Though the broader impact and opportunity for Australian private equity and venture capital will only be captured in investment values and realisations over time, the well-established industry reflects a pool of capital capable of achieving outstanding long-term returns above public markets, while providing differentiated sector exposures, as well as access to smaller and private companies.


Eugene Snyman is a Partner and Managing Director at Cambridge Associates with over 25 years of investment experience. He is responsible for managing the firm’s Sydney office and overseeing the firm’s Australasian client practice.

Margaret Schlott is a Senior Investment Director in the firm’s Sydney office with over 18 years of investment experience. She contributes to the firm’s research on private investment managers, the Australian and New Zealand private investment benchmarking data, and works with clients in the region.

Data Notes

Unless otherwise noted, all data represents the Cambridge Associates Australian Private Equity and Venture Capital Index as of 31 December 2019 and is reported in Australian dollars. To compile its performance data for the industry, independent investment firm Cambridge Associates has access to numbers from the audited financial records of fund managers which enables it to accurately calculate fund level returns net of all fees and expenses. The Cambridge Associates Australian Private Equity and Venture Capital Index performance figures are calculated by aggregating all cash flows as if they applied to a single fund to provide industry performance. The Index is published quarterly, and the data is available from the Australian Investment Council.

About Cambridge Associates

Cambridge Associates is a global investment firm. The firm aims to help pension plans, endowments & foundations, healthcare systems, and private clients implement and manage custom investment portfolios to generate outperformance so they can maximize their impact on the world. With more than 45 years of institutional investing insights, the firm has helped to shape and implement investment best practices and built strong global investment networks with the purpose of driving outperformance for clients. Cambridge Associates delivers a range of services, including outsourced CIO, non-discretionary portfolio management, staff extension and alternative asset class mandates.

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