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Super fund private equity inflows constant
Thursday, 23 February 2012 12:05pm

Australian superannuation fund inflows into private equity have remained constant despite fears of a lag in interest, with Asian investors also investing in this space, according to speakers at a BNP Paribas event this week.

Dr Katherine Woodthorpe, chief executive of Australian Private Equity and Venture Capital Association (AVCAL) said Asian investors are investing in the local private equity market either through fund-to-fund or direct pension fund investments, while local pension funds remain active.

"Australia has remained constant although people are fearful that Australians super funds and the like are putting less towards private equity but the numbers have remained constant with 43% over five years matching 42% over the last 12 months," said Woodthorpe.

According to Asian Venture Capital Journal (AVCJ) research, private equity and venture capital funds raised US$2.3 billion in Australia in 2011, a 72% increase over the previous year, although only three funds were listed as primary sources.

BNP Paribas, which holds a strong focus in alternative investments on a global scale, hosted the event on private equity for local economists and fund managers, with fellow guest speaker Erik Hirsch, chief investment officer at Hamilton Lane, a private equity investment management firm with US$22 billion in discretionary assets under management, providing a global outlook for the asset class.

"Most people believe that global equity markets will generate single digits returns. For most managing a portfolio, your expectation is that 8% actuarial rate returns are the common target these days and people are looking for something that is going to generate excess performance. Private equity is one of the few assets that has consistently done that," said Hirsch.

Hirsch said that private equity investors are waking up to the fact that they don't need as many fund managers as they thought they use to with one of the biggest mistakes investors make being overly diversified portfolios.

"This means people are going to get a lot more rational about how many fund managers they want on their portfolio."

Hirsch said there is a backlash occurring against mega fund managers in the market and that people, worried about these massive pools of capital, are questioning whether that will be the ideal way to generate private equity performance and therefore will prefer to deal with smaller fund managers.

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