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VC&LSPE fund managers set up a fund (vehicle) usually as a trust or company. Investors are attracted to raise capital for the fund, which are drawn down over time. The value of Commitments is the capital pledged by investors, representing the maximum amount that the fund can draw down from investors. Most investors in the VC&LSPE survey come from Non-Resident sources, Resident Pension Funds, and Other Resident Funds (such as governments and business).
Once the fund (vehicle) has capital, the fund manager enters into deals with investee companies and provides assistance and advice to maximise potential for capital gains. They return new capital (original capital plus profit minus loss) as investments are realised. Investors and fund managers receive capital gains once the stake in the company has been exited.
The usual relationship between investors, managers, vehicles and investee companies is shown in the image below. There are two types of VC&LSPE funds (vehicles): direct vehicles, which generally place investments directly into investee companies; and indirect vehicles that pool funds and generally place investments with direct vehicles. These are called Fund of funds. Fund of funds may also co-invest with another fund manager.
The value of capital committed to VC&LSPE funds (vehicles) increased in 2016-17. As at 30 June 2017, investors had $22,564m committed, an increase of 15% on the $19,550m committed as at 30 June 2016. Non-Residents: Other (including foundations, endowments, trading enterprises, individuals, etc.) contributed $8,193m to total committed capital (36% of total funds committed), an increase of $2,296m compared with 2015-16. Resident Pension Funds contributed $7,564m to total committed capital (34% of total funds committed).
Drawdowns from investors totalled $17,370m as at 30 June 2017, an increase of 11% on the $15,708m committed funds drawn down as at 30 June 2016.
Unused commitments of $5,193m were yet to be called as at 30 June 2017. These Unused commitments can be classified by preferred entry stage of investment, with $3,607m unused by funds (vehicles) that prefer to invest in companies in the LSPE stages and $1,586m unused by funds (vehicles) that prefer to invest in companies in the VC stages.
Total Value of investments by VC&LSPE funds (vehicles) as at 30 June 2017 ($10,575m) rose 15% on the $9,213m reported as at 30 June 2016.
The Value of investments as at the end of the financial year as a proportion of Australia's Gross Domestic Product (GDP) was 0.60%, an increase from 0.56% from 30 June 2016.
NEW AND FOLLOW-ON INVESTMENT, BY CURRENT STAGE OF INVESTEE COMPANY, (a) 2015-16 to 2016-17
VC&LSPE funds (vehicles) made 211 New investments totalling $1,881m in value during the 2016-17 financial year. In addition to this, 161 Follow-on investments were made to existing investment deals to a total value of $366m.
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