Australian private capital sector totals $139bn: Report

Total Australia-focused assets under management (AUM) remained steady at $139 billion in 2024, with private equity, venture capital (VC), and private credit funds accounting for nearly half at $65 billion, according to the Australian Private Capital 2025 Yearbook.

The report, compiled by Australian Investment Council and Preqin, said Australian private capital funds have outperformed their international peers on key returns metrics, demonstrating resilience amid market volatility, inflationary pressures and higher interest rates.

Against the backdrop, Australia-focused funds offered an "attractive" risk and return profile, including a 13.8% median net internal rate of return among vintage funds between 2014 and 2021, against their counterparts in North America (12.4%), Asia (11.7%), and the rest of the world (9.8%).

Despite the steadiness, private capital fundraising fell to the lowest level in a decade from over $10 billion in 2023 to about $5 billion throughout last year. Preqin also highlighted the number of private capital funds closed globally was less than half that of 2021, falling almost a quarter year-on-year to the lowest total since 2014.

Hence, private capital AUM was fairly static, standing at $139 billion as of September 2024, largely unmoved since December 2023.

Private credit has become an attractive asset class among global private wealth investors due to its "floating rate" properties in a high-interest rate environment, with managers increasingly creating open-ended private credit funds to target investors in Australia, the report said.

The open-ended private credit market is 10 times larger than the closed-end market, which stood at $2.7 billion as of September 2024 - not including private lending to property developers, which currently stands at $10 billion in AUM.

Conversely, private equity endured a "challenging year", seeing its AUM growth slow after a period of acceleration, remaining around the same level at $45 billion since 2022. Preqin blamed global slowdown in fundraising and deal-making, as well as falling asset valuations as the factors behind the sluggishness.

However, the report found that investors from both Australia and New Zealand, as well as Asia are shifting their investments to home, as the Australia-domiciled funds continue to "evolve".

"Investors from ANZ continued to make up the majority of investors in Australia-based funds, increasing from 49% for funds of vintages 2015-2019 to 54% of investors in funds of vintages 2020-2024," the report said.

"In the same vintage periods, the proportion of Asia-based investors rose from 5% to 10%."

Meanwhile, the VC sector has bounced back 7% to $17 billion in AUM, seeing an increase in both dry powder and unrealised value in the same period.

Real estate and infrastructure AUM were, however, negatively impacted by macroeconomic conditions, decreasing by 5.2% and 7.9%, respectively.