Private equity (PE) involves investing in companies that are not listed on a public stock exchange. Private equity funds buy, grow, and sell companies — typically over 5–10 year time horizons — aiming to generate returns above those available in listed markets. Accessing private equity as a retail investor in Australia has historically been difficult, but options are expanding.
What Is Private Equity?
Private equity firms raise capital from institutional and high-net-worth investors, pool it into funds, and use it to:
- Buy private companies outright (buyout funds)
- Invest in early-stage companies (venture capital)
- Fund company growth (growth equity)
- Buy distressed assets (distressed debt/turnaround PE)
Returns are generated by improving the acquired businesses and eventually selling them — via a public listing (IPO), a trade sale to another company, or a sale to another PE firm.
Private Equity Returns — What the Data Shows
Global private equity has historically delivered returns above listed share markets — often 2–5% per year above comparable public equities over long periods, according to research from Cambridge Associates and others.
Important caveats:
- These figures rely on self-reported PE fund data — subject to survivorship bias and valuation smoothing
- Illiquidity premium: Higher returns partly compensate for the inability to access your money for years
- Manager selection matters enormously — top-quartile PE funds significantly outperform median funds; median PE underperforms listed markets after fees
- Past performance is not a reliable indicator of future performance
How Retail Investors in Australia Can Access Private Equity
1. Listed Investment Companies (LICs) with PE exposure
Several ASX-listed vehicles provide exposure to private equity or private credit:
- WAM Alternative Assets (WMA): Invests in private markets, alternatives, and real assets
- Cordish Dixon Private Equity Fund (CD1, CD2, CD3): Listed vehicles investing in unlisted US private equity
- Pengana Private Equity Trust (PE1): Provides retail access to global private equity managers
These trade on the ASX like shares — providing liquidity that direct PE funds do not.
Caution: LICs investing in illiquid private assets often trade at significant discounts to their net asset value (NAV). The price you pay on the ASX may be well above or below the underlying value of the assets.
2. Wholesale PE funds (for sophisticated investors)
Direct PE funds in Australia are largely restricted to wholesale (sophisticated) investors — those with:
- Net assets exceeding $2.5 million, or
- Gross income exceeding $250,000 in each of the last two years, or
- A certificate from a qualified accountant confirming sophisticated investor status
Wholesale PE funds include local managers (Quadrant Private Equity, Pacific Equity Partners, BGH Capital) and Australian arms of global firms (KKR, Blackstone, Apollo).
Minimum investments typically start at $250,000–$1,000,000.
3. Superannuation exposure
Australia’s large super funds — particularly industry funds — allocate significantly to unlisted private equity and infrastructure:
- AustralianSuper, Aware Super, Hostplus, and others allocate 5–20% of their growth option portfolios to private equity and unlisted infrastructure
- Being a member of these funds provides indirect PE exposure through your super
This is the most common way ordinary Australians access genuine private equity returns — through their super fund’s investment in unlisted assets.
Key Risks
Illiquidity: PE investments lock up capital for 5–10+ years. You cannot sell when you want — returns are realised only when the fund exits its investments.
Manager risk: PE returns are highly manager-dependent. Poor manager selection can result in returns below listed markets even after the illiquidity premium is accepted.
Leverage: Many PE buyout deals use significant debt (leverage). This amplifies returns in good times and losses in bad times.
Valuation opacity: Unlisted assets are valued internally — not by daily market pricing. Valuations may not reflect true market value until assets are sold.
High fees: PE managers charge management fees (typically 1.5–2.0% of committed capital) plus carried interest (typically 20% of returns above a hurdle rate).
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Frequently Asked Questions
Can retail investors access private equity in Australia? Direct PE fund access is largely restricted to wholesale (sophisticated) investors. Retail investors can access PE-like exposure via ASX-listed investment companies (PE1, CD1/CD2/CD3) or indirectly through industry super funds that allocate to unlisted private equity. Each approach has different return profiles, fee structures, and liquidity characteristics.
Does private equity outperform the share market in Australia? Globally, top-quartile PE funds have historically outperformed listed markets. However, median PE funds — after fees — may deliver similar or lower returns to public equities. Access to top managers is typically restricted to large institutional investors. The illiquidity premium also requires accepting 5–10 years without access to capital.
Is private equity in super a good thing? Industry super funds invest in unlisted private equity and infrastructure to generate higher long-term returns and diversification for members. This is generally considered a positive feature of Australia’s industry super system — retail investors gain institutional-grade PE access through their super that they could not access individually.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.