Chart of the Month - May 2025

With an IRR of 13.8%, Australian-focused private capital funds are outperforming other regions and have the second-lowest risk after European-focussed funds (see chart below). Australia’s private capital market is of course smaller than those of the global heavyweights but when it comes to returns and risk, it is punching above its weight.

“Australian companies benefit from deep, high quality capital markets in which they can raise funds to support their operations and expand their business.” Jacob Harris and Emma Chow, RBA, RBA Bulletin April 2024.

Source: Australian Private Capital Yearbook 2025, Australian Investment Council

AUM decreases slightly in 2024

AUM in Australian-focused private capital decreased by 1% in 2024 to AUD 139 billion (see chart below). This continues the weak results since the end of the pandemic. However, this trend also reflects the weak growth in AUM for global private capital.

While total AUM decreased for Australian private capital, the amount invested in assets increased. The increase was offset by a 14% fall in dry powder.  

Source: Australian Private Capital Yearbook 2025, Australian Investment Council

AI provides bright spot in VC

AUM in Australian-focused private equity has been flat since 2022. In contrast, AUM in Australian Venture Capital increased by 7% in 2024. IT remains the biggest area of investment.

Looking at deal activity, while the total value of VC deals has been falling since 2021, the value of AI deals increased by 49% in 2024 to AUD 1.3 billion (see pink line in chart below). This includes AI startup acquisitions by Atlassian (owner of Jira and Trello) and Canva’s recent acquisition of generative AI content company Leonardo.Ai.   

Source: Australian Private Capital Yearbook 2025, Australian Investment Council

Increasing investment by Asian investors

While Australian and New Zealand investors remain the biggest investors in Australian private capital, Asian investors have doubled their share to 10% over the last 5 years (see chart below).

“Australia’s position as the world’s 13th largest economy and its proximity to fast-growing Asian markets are assets.” Navleen Prasad, Australian Investment Council, CEO.

Australia offers exciting investment opportunities for Asian investors that are close to home. Australia is also benefiting from its growing trade with Asia on the back of decades of trade liberalisation between Australia and the region. Australia’s deep capital markets, world-class regulatory system, and predictable democracy also offers stability in uncertain times.

Source: Australian Private Capital Yearbook 2025, Australian Investment Council

The rise of Australian family offices

An interesting trend among Australian investors in Australian private capital has been the rise of family offices and the declining importance of superannuation funds (retirement funds). Australian family offices now represent the biggest group of active investors by number (see chart below).

The size of Australia’s superannuation funds is well known around the world. In December 2024, super funds had over AUD 4.2 trillion AUM. However, the number of Australian family offices has more than doubled over the last decade and their share by number of investors in Australian private capital has quadrupled in the last 4 years. While smaller in terms of total AUM, Australian family offices have become an important player in the Australian private capital space.

The rise of Australian family offices comes at a time where the Asia-Pacific region has been highlighted as the fastest-growing region for family offices. 

“Between banks and super funds, there are meaningful gaps in the system. Family offices were the first to fill that lending gap,” Paul Heath, Koda Capital, CEO.

Source: Australian Private Capital Yearbook 2025, Australian Investment Council

Final thoughts

Investment in private capital has taken a hit around the world since the pandemic and Australia is no different. Australia, however, offers something special: a resilient economy and stable politics that serves as a foundation to a burgeoning tech sector and exposure to fast-growing Asian markets. The potential of Australian private capital is being highlighted by the growth in the number of Asian inventors and Australian family offices investing in the space.