Diversifying your Asia exposure: Australia private equity

Introduction

As private equity investors reassess Asia exposures amid geopolitical and regulatory uncertainty, Australia presents a differentiated proposition.¹ It combines the resilience of a stable, developed economy with transparent market mechanisms and regional integration. It also offers indirect exposure to Asia’s growth through expanding trade flows.

Several themes stand out:

• The lower middle market (LMM) remains significantly underpenetrated, creating opportunities for outsized value creation.
• Returns have been consistently strong, supported by secular tailwinds across healthcare, technology and business services.
• Together, these dynamics offer investors developed-market safety with emerging-market adjacency—a rare blend that can enable stable compounding returns in an increasingly volatile world.

Steady macroeconomic backdrop, yet low PE penetration

Australia’s private equity AUM has more than doubled in the last ten years, reaching A$45 billion in 2024. Yet penetration remains relatively low (Figure 1). The market is also underserved, with fewer than 100 buyouts a year compared with thousands in the US and UK, and only a limited number of scaled institutional funds despite a wide breadth of investable companies (Figure 2). This disconnect suggests headroom for growth.

Against this backdrop of low penetration, the broader economy remains robust. After nearly three uninterrupted decades of expansion prior to Covid, Australia’s GDP is projected to grow 2% annually over the next two years. Immigration-led population gains, a highly skilled workforce, fiscal strength and a stable political environment—factors that drive both domestic consumption and investment in key sectors—underpin this growth.

Complementing these macro fundamentals, Australia’s regulatory and pension framework is channeling more capital into private equity. Its A$4.2 trillion superannuation system provides a powerful structural tailwind: Private assets in so-called supers have risen from A$300 billion in 2022 to A$400 billion in 2024, and allocations to domestic private equity and co-investments are steadily increasing.

Meanwhile, government initiatives—such as the Early-Stage Venture Capital Limited Partnership (ESVCLP), and the National Reconstruction Fund—further reinforce capital flows by offering tax incentives and co-investment opportunities.

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