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Exits by funds in Australia rises due to shareholder demand - private equity, venture capital

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December 3
11:02 AM 2013

On Tuesday, the Australian Private Equity and Venture Capital Association noted that private equity funds in the region had sold USD866 million worth of assets via initial public offerings in the first six months of this year. The association also said this was the highest level of exits posted in the last five years. The Sydney Morning Herald attributed this phenomenon in its article to the fact that the private equity sector was rushing to cash in on investor demand evident in stock rallies on major exchanges around the world.

On the other hand, the association via its chief executive Yasser El-Ansary expected that more assets will be divested between this year to 2014 as compared to last year till the first few months of 2013. El-Ansary's comments, the Sydney newspaper said, also called for investors to be wary about their investment decisions as new stocks will be coming to the market.

Mr El-Ansary said, "The outlook for this financial year is a really positive one for the market. There's a noticeable shift in momentum in business confidence, particularly on the back of the strength in the equities market."

Fund manager Cadence Capital Chairman Karl Siegling, like the newspaper, stressed the importance of investor caution when investing in new stocks. Siegling said about three of ten companies that get listed are successful, and that companies who are in a rush to float will have higher failure rates.

Siegling added, "It's buyer beware with IPOs, because you're buying something for the first time. The frenzy at the moment is being driven by sellers."

The high float market activity was seen after private equity experienced a soft period. The association's figures indicate a sharp decline in private equity funds raised. USD711 million in total funds were raised over the year, as compared to USD3 billion raised in the past year. Figures of the Australian Private Equity and Venture Capital Association also indicated a slowdown of new investments, as a 8% decline was seen to USD2.76 million.

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