Australian LPs struggle to recruit PE talent - AVCJ Forum

As the industry has grown, so has the array of tools through which institutions can generate returns. They are still largely based around primaries, secondaries and co-investment, but within these segments, approaches are increasingly nuanced. The problem is hiring people who can execute these strategies, especially if they require more GP-like skill sets.

“Groups focus on co-investment to drive returns and reduce costs, but they need people who have experience of making decisions and putting capital at risk,” said David Simons, a co-founder of institutional advisory firm Potentum Partners and until recently a member of Future Fund’s private equity team. “It is easier to teach a direct investor how to do fund investing than the other way around.”

Hiring direct investors presents compensation issues, given Australian LPs cannot offer performance-based incentives that match carried interest. Simons observed that the structure of the package is just as important as the final amount, as long-term incentives are required for a long-term asset class. “I see a lot of investors struggling with that and we certainly struggled with it at Future Fund,” he said.

Sunsuper is one of Australia’s largest industry superannuation funds with A$59 billion ($42 billion) in assets under management. The group has 20-30 core GPs in its private equity program and relies on external co-investment partners to generate additional direct exposure. Attracting the talent required to perform more of these functions in-house is difficult.

“We cannot compete with direct investors on compensation, it’s about finding people who want a work-life balance,” said James Lilico, portfolio manager for private markets at Sunsuper. “There is a limited pool of talent with the right skill sets.”

He also acknowledged that adding a new person to a relatively small team changes the dynamic, so superannuation funds must be careful in picking the right people. This view was echoed by Alicia Gregory, head of private equity at MLC – which has more than A$100 billion in assets and manages Australia’s largest retail superannuation fund – who noted that culture is the most important factor.

“There is a philosophy to our investment strategy and we want people coming in who can contribute to that,” said Gregory, who will shortly take up the role of private equity head at Future Fund.

For QIC, an investment manager owned by the Queensland government that has A$85 billion in sovereign and third-party capital, diversity is also a key consideration in recruitment. “We want to be challenged by people with different ways of thinking and different backgrounds,” said Marcus Simpson, CIO at QIC.

For more detailed coverage on increased appetite for co-investment among Australian LPs, and how recruitment remains a major obstacle to progress, please read this story.

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• Topics
• Australasia
• LPs
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• Australia
• AVCJ Events
• LPs
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• Sunsuper
• QIC
• MLC Private Equity
• Future Fund