Australian LP halts PE investments, shifts to infrastructure

The A$34.7 billion (€25.6 billion;$37.3 billion) Victoria Funds Management Corporation (VFMC) has ceased making new commitments to private equity in favour of increasing investments to infrastructure, the Australian firm confirmed to sister publication PE Asia.

A spokeswoman said the shift was not because of underperformance  but rather because of overexposure to the asset class.

“Our clients believe we are overweight to private equity and underweight in infrastructure,” the spokeswoman said, adding that its clients currently preferred “income-producing assets with yields linked to inflation” and returns for infrastructure matched their clients’ liability profile.

As a result of the shift, VFMC private market co-heads Andrew Strachan and David Brown have been fired, although a team will remain to manage the firms’ existing private equity assets, which are worth about A$1.2 billion. 

One market source said the change in direction was “sudden”, while local Australian trade magazine Investment and Technology reported that as recently as six weeks ago the co-heads had been meeting with general partners overseas, believing they had board approval for up to A$150 million in fund commitments over the next three years. 

VFMC had a 3.7 percent allocation to private equity and has previously committed to fund managers including Advent Private Capital, CHAMP Private Equity and Goldman Sachs, according to sister data provider Private Equity Connect.

The spokewsoman said the Australian firm has no current plans to offload its existing private equity portfolio, and noted it could potentially make private equity investments once again in the future, depening on client appetite.

VFMC was established in 1994 by the Treasurer of Victoria, Australia to offer funds management services to the Victorian Public Sector.