Shearwater's Stead becomes Australia head at Olympus Capital Asia

"We decided not to pursue a second fund because we didn't feel we could raise the scale of fund that we wanted in order to be competitive. This was due to the very challenging fundraising environment and notwithstanding the fact that our investing performance was strong," Stead told AVCJ.

Shearwater's operations have been scaled back and the future of the partnership is uncertain.

In recent years, Australian LPs have begun to diversify their portfolios, increasing exposure to overseas funds and therefore scaling back on domestic commitments. Local fund managers therefore have little option but to seek more capital from offshore investors.

Larger GPs, such as Archer Capital, CHAMP Private Equity, Pacific Equity Partners and Quadrant Private Equity, have enjoyed some success in this area. However, smaller players that don't offer the fund scale required by many LPs in the US and Europe are struggling.

Olympus Capital Asia has invested approximately $1.5 billion in 35 portfolio companies over the last 15 years, principally targeting China, India, Japan and South Korea. It is interested in agribusiness and resources, clean energy and environmental services, and financial and business services.

There is something of a shared history with Shearwater. Olympus executives and backers provided some of the seed capital when the Australian private equity firm was formed.

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