Having spoken to and met with the top investment executives from more than 25 Australian Industry Super Funds in Australia over the past 12 months, bringing allocation to over 4 top Silicon Valley venture capital funds raising between US $150 million and $300 million in their fourth, fifth, sixth and ninth funds, there are several insights to share:
1. More than 80% of Australian Industry SuperFunds with Funds Under Management of $5 billion do not currently invest in nor have current plans to invest in technology venture capital funds. 30% cited their ‘asset consultants’ as being influential in their investment decision making process. In meetings with these asset consultants in both Sydney and San Francisco, it was very clear that they were not convinced their clients (Australian SuperFunds) would be investing in US based technology VCs funds.
2. Two of the Asset Consultants representing large Australian Industry SuperFunds invest directly into US venture backed software start ups. StepStone Global and Hamilton Lane have funds within their operations that invest in technology venture funds and start ups directly.
US based Venture Capital Funds represented by Frequency Ventures have consistently 3 attributes: multiple fund cycles over 10 to 20 years of operation, history of returning invested capital to limited partners and large exits / IPOs of well known successful companies. Among the 4 top Silicon Valley venture capital funds Frequency Ventures has allocation into, PayPal, NetFlix, Nest, Coupa, Dropbox were portfolio companies. WOW! One of the funds has raised over US$3.1 billion in 9 funds since 1995 returning $1 billion in distributions.
Historical venture capital returns from US venture capital funds compared to Australian venture capital funds should be the focus for Australian Industry SuperFunds.
The main topic that asset consultants discussed with Frequency Ventures in meetings is cost cutting of management fees instead of focusing on the true reason for investing in venture capital as part of a diversified portfolio. That is, exponential returns that other asset classes do not have.
Australian Industry Super Funds need to understand that US venture capital investment has sprinted past decade-highs and shows no signs of slowing down. In 2018, U.S. companies have raised $84.1 billion — more than all of 2017 — across 6,583 VC deals as of Sept. 30, 2018, according to data from PitchBook’s 3Q Venture Monitor. In 2017, companies raised $82 billion across more than 9,000 deals in what was similarly an impressive year for the industry.
The 4 US Venture Capital Funds that Frequency Ventures have over $150 million of allocation circled and presented to the 25 Australian Industry Super Funds in Australia over the past 12 months is an opportunity to participate in a rapidly growing asset class.
How long can Australian Super funds ignore this market and asset consultants stifle Australia SuperFund venture capital investments in the technology companies that become the largest businesses on earth?