Woodthorpe -- "Pushing to help mid-tier funds facing hard times".
MELBOURNE: Private equity groups are looking overseas for new sources of funding as Australian superannuation funds scale back their investment in the sector.
The Australian Private Equity and Venture Capital Association (AVCAL) is working to attract Asian investors as part of a push to help mid-tier funds facing hard times, its chief executive Katherine Woodthorpe said.
"Australia's much more than Archer and CHAMP (private equity funds). There are whole tiers of quality smaller firms below that.
"The pulling back of the supers has been a huge concern for smaller funds," Woodthorpe told news agency AAP.
Mid-tier private equity funds managing between A$100 million and A$250 million have struggled to find local investors as super funds pared back investments and reallocated capital to larger, international players, AAP said.
Last year, two of the private equity sector's largest investors, Victoria Funds Management Corp and UniSuper, cut their exposure to the sector in a bid to streamline costs.
Quentin Jones, a partner in mid-cap fund Equity Partners, told AAP the push for greater funding from overseas would help smaller funds by easing Asian investors' concerns about their exposure to the Australian market.
"The problem offshore investors (face) is, they often have minimum cheque sizes of say A$50 million, but don't want more than a 10 per cent stake.
"For small funds like ours, that are only around A$100 million, this creates a huge problem," he said.
AAP said Australia's private equity industry has seen a drop off in activity in recent years as liquidity has dried up in the wake of the global financial crisis.
The value of deals done in 2010 slumped to A$3.9 billion with only 43 new transactions in the whole 12 months, according to AVCAL data. This was down from a peak of A$24.9 billion in 2007.
Experts forecast a pick up in 2012 as cash-rich funds coming toward the end of their investment cycle go bargain-hunting in undervalued equity markets.