AVCAL: Australia punching above its weight in PE

7th Jul 08

Australia's relatively tiny population of 20.6 million (0.3% of global population) often manages to contribute one to two percent of most figures in the economic world. The 2007 nominal Gross Domestic Product (GDP) was $908 billion US dollars, representing 1.7% of global output. The Australian Securities Exchange (ASX) contains 2.2% of the value of all the exchanges within World Federation of Exchanges (WFE). The constantly growing Australian Private Equity (PE) industry is no different.

From 2003 to 2007 Australian PE raised over $22 billion USD, around 1.4% of funds raised globally during the period. Not surprisingly the United States completely dominates the fundraising statistics, raising nearly 69% of global funds during the five year span.

Top 15 Global GDP Countries and their Private Equity Fund Raising

GDP Rank Country GDP - Nominal
(USD mil)
Funds Raised
(USD mil) 2003-2007
Fund Raising Rank
1 USA $13,843,825 $1,068,487.80 1
2 Japan $4,383,762 $9,836.50 7
3 Germany $3,322,147 $13,282.00 6
4 China $3,250,827 $6,358.30 11
5 UK $2,772,570 $208,018.00 2
6 France $2,560,255 $49,427.90 3
7 Italy $2,104,666 $7,073.60 10
8 Spain $1,438,959 $4,835.60 13
9 Canada $1,432,140 $18,664.40 5
10 Brazil $1,313,590 $1,810.50 14
11 Russia $1,289,582 $5,472.10 12
12 India $1,098,945 $7,298.50 9
13 South Korea $957,053 $8,142.70 8
14 Australia $908,826 $22,083.00 4
15 Mexico $893,365 $172.00 15
 
Average $2,771,367 $95,397.53
 

Source: Thomson VentureXpert, IMF, AVCAL

In Australian PE over the past five years there has been approximately $1071 raised per person, third only to the United States and the United Kingdom . There is quite a significant gap to the other countries as France is next with only $771 raised per person. The emerging BRIC ( Brazil, Russia, India and China ) economies are also clearly yet to create a substantial private equity market.

Private Equity by: Population, GDP and Public Markets

Country Funds Raised (USD mil)
2003-2007
Per Person (USD)
(Pop. as at June 08)
% of GDP – Nominal (2007) % of Stock Exchange
(as at May 2008)
USA $1,068,487.80 $3,516.79 7.72% 5.54%
Japan $9,836.50 $77.28 0.22% 0.21%
Germany $13,282.00 $161.25 0.40% 0.66%
China $6,358.30 $4.78 0.20% 0.20%
UK $208,018.00 $3,413.27 7.50% 5.85%
France $49,427.90 $771.61 1.93% 1.26%
Italy $7,073.60 $121.65 0.34% 0.73%
Spain $4,835.60 $119.42 0.34% 0.26%
Canada $18,664.40 $561.97 1.30% 0.89%
Brazil $1,810.50 $9.43 0.14% 0.11%
Russia $5,472.10 $38.89 0.42% 0.42%
India $7,298.50 $6.36 0.66% 0.29%
South Korea $8,142.70 $165.39 0.85% 0.81%
Australia $22,083.00 $1,071.95 2.43% 1.76%
Mexico $172.00 $1.56 0.02% 0.04%
Average $95,397.53 $669.44 1.63% 1.27%

Source: Thomson VentureXpert, IMF, CIA World Fact Book, WFE, AVCAL

As a percentage of GDP and the local public exchanges, the US and the UK clearly represent their more matured PE markets. Averaged over the five years Australian funds raised equate to only 0.49% of GDP per annum, well below the US and UK who both averaged over 1.5% per year. In terms of the Australian Securities Exchange (ASX) the past five years of fund raising equates to 1.76% of total exchange. Even taking into account a generous leveraging multiple (30% equity: 70% debt), this would give the entire industry the power to buy only 5.85% of the exchange, equal to the weight of the UK industry unlevered.

Source:

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