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Aussie private capital on the rise: Report

Australia's private capital industry reached a record $90 billion in assets under management at June 2021, according to Australian Investment Capital (AIC) and Preqin's most recent report.

The 2022 Private Capital Market Yearbook report also recorded $26 billion in uncommitted capital held by Australian-focused private capital fund managers last year.

Private equity and venture capital, which accounts for half of private capital assets under management, saw high deal volumes in 2021.

The aggregate value of private equity deals reached $20.1 billion, which was 20% more than the previous peak of $16.8 billion achieved in 2019.

Meanwhile, venture capital deals set an all-time record of $7.9 billion, doubling the previous year's $3.9 billion.

Agriculture and farmland remains the top primary industry for capital secured in Australia (excluding private equity funds focused on natural resources), accounting for a third of the total capital raised in unlisted infrastructure and natural resources between 2020 and 2021.

"Private capital continued to find new investment opportunities despite the disruption caused by border closures and the extended impact of the COVID-19 pandemic," Australian Investment Council interim chief executive Jonathan Kelly said.

Dave Lowery, senior vice president and head of research insights at Preqin said: "Australia's sophisticated and mature private capital market remains attractive. With returns of 17.8% (median net IRR) for Australia-focused funds with fund vintages from 2012 to 2019, fund performance topped North America, Europe, and Rest of World."

Lowery added that Australia is increasingly seen as a desirable destination and hub for institutional investment, with the active participation of both international and local fund managers.

"We believe that private capital will play a key role in the country's economic recovery, due to the sector holding $26 billion in available funds for investment," he said.

Private debt was the fastest-growing asset class in Australia, despite only constituting 2% of total private capital assets under management. Its AUM grew 144% over the period.

Direct lending funds accounted for 36% of the deals and 25% of the total sum raised at final close.

"Private debt managers are an increasingly important source of funds for small to mid-sized Australian companies, as the commercial banks impose tighter lending conditions in response to regulatory pressures," Kelly said.

"Businesses are also responding to the commercial approach and flexible debt packages offered by the private debt segment, which increases the capacity to invest in growth initiatives."

Foreign investment has also increased, comprising 49% of investors today compared to 18% two decades ago.

Read more: PreqinAustralian Investment CapitalDave LoweryJonathan KellyAustralian Investment Council