AUSTRALIA Trends and Developments Contributed by: Andrew Stone, Dhanushka Jayawardena, Andrew Choi and Chris Kinsella, Holding Redlich
in a range of different contexts (eg, distressed versus non-distressed) and geographic markets. This vari - ability affects pricing, performance measurement, and investor confidence. Solutions being explored include increased use of third-party valuation services, development of indus - try standards, and greater transparency in valuation methodologies and potential regulatory guidance, as outlined here. Regulatory evolution and liquidity requirements Australian alternative fund managers operate under evolving regulatory frameworks that present both challenges and opportunities. Prudential Standard SPS 530 requires superannuation funds to maintain comprehensive liquidity management plans, affect - ing how these major investors approach alternative investments. Retail investor funds structured as registered man - aged investment schemes must apply statutory liquid - ity tests referencing “market value” but the definition requires greater precision. This regulatory uncertainty affects product design and investor access to alterna - tive strategies. ASIC plans to release guidance on key regulatory matters such as valuations, liquidity management, fees, and associated disclosures and reporting in November 2025. This guidance is expected to influ - ence how alternative managers structure and operate their funds. Performance and market resilience Superior risk-adjusted returns Australian alternative funds have demonstrated strong performance characteristics compared to global peers. The Preqin Australian Private Capital 2025 Yearbook states that Australia-focused funds with vin - tages between 2014 and 2021 achieved a median net internal rate of return of 13.8%, outperforming funds focused on North America (12.4%), Europe (12%), Asia (11.7%), and other regions (9.8%). Equally important, Australian funds exhibited one of the lowest risk profiles globally, with a standard devia - tion of net internal rate of return (IRR) of 15.4%. This
attractive risk-return combination reflects the rela - tive stability of the Australian economy, sophisticated regulatory framework, and the expertise of local fund managers. The five-year median distributions to paid-in ratio for 2019 vintage Australia-focused private equity funds reached 0.39x, outperforming earlier vintages (0.31x for 2017 and 0.34x for 2018) and global private equity funds of the same vintage (0.18x). Fundraising resilience Preqin states that fundraising for Australia-focused funds fell to AUD5.7 billion (the lowest level in a dec - ade), indicating continued pressure on domestic alternative strategies. Despite this, Australian-based managers demonstrated relative resilience in fundrais - ing. The 14% year-on-year decline in capital raised to AUD13 billion in 2024 compared favourably to larger contractions in North America (-26%), Asia (-49%), and other regions (-89%). Investor base evolution The composition of investors in Australian alternative funds is shifting towards regional sources. Investors from Australia and New Zealand increased from 49% to 54% of fund investors between vintage periods 2015‒19 and 2020‒24. Similarly, Asian investor par - ticipation doubled from 5% to 10% during the same period. This regional shift suggests growing sophistication of local institutional investors and increasing attractive - ness of Australian alternative strategies to regional peers. It also suggests reduced reliance on traditional European and North American sources of capital. Sector-specific developments Private equity challenges and adaptations Australian private equity faced significant headwinds in 2024, with fundraising reaching decade lows and deal activity slowing substantially. According to Pre - qin, only six Australia-focused private equity funds achieved final close in 2024, raising AUD1.7 billion in total. Deal activity reflected broader market challenges, with aggregate deal value falling 66% from AUD30
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