Western Australia is the country's fourth-largest state by population but the richest by natural resources and this has seen it emerge as the primary source of economic growth. This shift in momentum from east coast to west – coupled with the cyclical downturn in retail sector – is reflected in private equity investment trends.
"When I look at the Advent V portfolio, about one third of the investments are infrastructure or mining focused," says Rupert Harrington, managing director of Advent Private Capital, an Australian mid-market private equity firm. "In one case, there is full exposure to mining because it's an underground mining services company. In others, there is a variety of exposure to mining-related markets. In Advent VI, which we are currently raising, our first investment is mining services and about one third of the portfolio will be in this area."
As for retail, Advent has never been a big investor in the sector and this is unlikely to change. Harrington notes that retail sales are at a 50-year low in relation to real growth - an unusual situation in Australia, but perhaps one that reflects the commodities boom - while the sector itself is incredibly competitive. The highly concentrated ownership of shopping malls doesn't help firms with an eye on expansion.
"When we've looked growth businesses, there has been a significant increase in the rents in shopping centers," Harrington adds. "In essence you get a profit shift from the business to the landlord, and the disparity of negotiating power is a problem."
Looking at the principal challenges facing Australian private equity, Harrington highlights fundraising, primarily due to domestic LPs cutting back on their exposure to local funds. GPs that already have exposure to international investors - and can point to strong track records when pitching them for larger allocations - are therefore best positioned to cope with the changing environment.
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India's private equity industry is in a state of transition, and only funds that are nimble on their feet and adaptive will ultimately survive. Find out what you need to navigate India's changing landscape at the 14th Annual AVCJ Private Equity & Venture India Forum on 5-6 December. Last year's Forum was attended by more than 250 top executives coming from 15 different countries and territories around the globe. Over 50 LPs joined the event, including dozens of foreign investors looking to increase their allocations to India or to invest in the country for the very first time. The conference featured in-depth analysis about India's private equity industry with sessions that covered topics ranging from confronting the difficult exit and fundraising environment, to understanding regulatory changes, to predicting where the industry will likely be in 2015.
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After a decade-long mining boom the economy is experiencing a loss of momentum and the resulting deal flow reduction and lack of value in the market means GPs are chasing many of the same acquisition targets. That said, the exit market is recovering with both IPOs and M&A activity picking up, and an increase in LPs appetite for the asset class, and the recent government change means that the industry is cautiously optimistic for the future and expecting a rise in activity over the next 12 months.
, Four Seasons Hotel, Sydney