It is a well established trend that Australian LPs are increasingly looking to internationalize their private equity exposure, arguably at the expense of domestic GPs. Foreign investors looking to enter Australia are not deterred. Sebastiaan van den Berg, managing director at HarbourVest Partners, has no plans to scale back, citing the country’s stable economy, rule of law and experienced GP community.
He does admit, however, that the retreat of domestic LPs leaves their foreign counterparts in a bind. "Perhaps from a more selfish perspective, less capital driving up valuations is better - to the extent that less capital is raised, we probably benefit from that net-net," he tells AVCJ TV. "But we want the GP community here to be successful and it's important for Australian LPs to be long-term active participants."
Nevertheless, an increasingly discerning domestic LP base and weaker economic conditions - Australia's natural resources sector is thriving, but this doesn't extend to the retail space, for example - have created more challenging conditions for GPs. Van den Berg doesn't expect everyone to survive, noting that, unlike six years ago, a rising tide is no longer floating all boats.
"What is happening now, as it becomes increasingly difficult to rely on the global macro environment and multiples arbitrage, the only way you can get attractive returns is through strong operational improvements," he says. "Only a few GPs are really good at that, so you probably will see some go out of business or merge and consolidate. That in itself is not a bad thing."
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These are important times for the private equity industry. General partners are becoming a more important and influential force in the global markets. With the diversification into other classes of the alternative space, private equity firms are cornering the market for private market investing by offering companies customized solutions for their financing needs. Traditional private equity firms have also upped their game with a renewed focus on operational value-add. Also back on the top are venture capitalists as they fuel the skyrocketing of the technology company valuations. Meanwhile, the Limited Partners community is also evolving with many positioning themselves as co-investment partners and branching out into direct investments while others continue to play the passive traditional LP role.
The AVCJ Forum will discuss all of the above and more. Don't miss the opportunity to keep abreast of all the crucial changes and developments in private equity and take part in the high level discussions that will create the outlook for the industry's future.
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