By Adrian Herbert
For years the Australian private capital sector measured its success in narrowing its performance difference to the North American sector.
This year, finally, the Australian sector can claim superior performance. But that does not mean we have escaped the economic turbulence that is affecting the sector globally. It is more that conservative strategies in a relatively stable economy have proved a better foil against global challenges than in most geographies. Australian fund managers still face the same challenges as those in North America and Europe. They are struggling to exit investments that should have returned capital to limited partners (LPs) years ago and fundraising has fallen sharply.
According to the 2025 Australian Private Capital Yearbook, released on 8 May, Australian private capital funds have withstood turbulent global conditions and are outperforming international peers on key return and fundraising metrics.
The data, published by the Australian Investment Council (AIC) and global private capital research house Preqin, shows that the Australian private capital sector has one of the lowest risk profiles globally. Measured by dispersion in net internal rate of return (IRR) between funds, the overall profitability of Australia-focused private capital funds – measured by median net IRR – is higher, at 13.8%, than funds focused on North America (12.4%), Europe (12.0%) and the rest of the world (9.8%).
Total assets under management (AUM) in the sector in Australia remained relatively static at $139 billion, as of September 2024, with nearly half of that, $65 billion, made up by private equity, venture capital and private credit funds. Notably, venture capital AUM grew by 7% in the nine months to September 2024, reaching $17 billion.
According to AIC chief executive Navleen Prasad, this latest data shows Australia remains an attractive market for international investors in the face of significant global headwinds and uncertainty.
“Private capital fundraising held up better in Australia than all other regions except Europe, declining by 14% year-over-year to $13 billion in 2024 while North America and Asia contracted by 26% and 49% respectively,” Prasad said.
“There are obvious challenges around liquidity and regulatory pressure, which are not unique to Australia, but overall, the prognosis for LPs and GPs [general partners] in Australia is encouraging,” she added.
Preqin’s global head of research insights, Cameron Joyce, noted the growth of vehicles to channel capital from individual investors into private capital in Australia.
“Preqin’s analysis shows Australia’s private capital investor base is evolving and reflects growing demand from non-institutional investors,” he said. “There has been a proliferation of new products to accommodate this demand, including open-ended structures. Amid significant volatility in public markets in 2025, investors continue to look to private capital as an effective way to gain exposure to long-term investment trends.”
The five-year median distributed to paid-in capital – a metric for measuring the capital returned to investors – came in at 0.39x for Australia-focused private equity funds of a 2019 vintage, better than that of global private equity funds of the same vintage (0.18x).
Institutional investors, including superannuation funds, account for over three-quarters (76%) of commitments when looking at Australia-focused private capital 2022-2024 vintage funds. However, private wealth investors’ share of commitments increased to 24% for 2022-2024 vintage funds, up from 8% for 2016-18 vintages.
Image: Australian Investment Council chief executive Navleen Prasad.