Sharing Success forum: Super funds urged to back Venture Capital sector

Alex Waislitz and Paul Bassat have called on superannuation funds to lift their exposure to venture capital.

Paul Bassat, Bridget Loudon and Alex Waislitz at the Sharing Success lunch in Melbourne yesterday. Picture: Stuart McEvoy

Two of the nation’s most esteemed investors have called on Australian superannuation funds to accelerate their exposure to the venture capital sector, warning they will increasingly have no choice as the weighting of tech companies increases in global sharemarket indexes.

There have been growing calls on Australian super funds to invest more in the local venture capital industry, but the funds have been hamstrung by the standard risk-return model and their investment mandates.

Veteran venture capitalist and Innovation Australia chairman Bill Ferris has said super funds need to invest more into the VC sector to drive commercialisation.

Wealthy investors such as Josh Liberman have even called for a certain proportion of super fund profits each year to be dedicated to risk ventures for which they would receive a full tax deduction.

Thorney Investments founder Alex Waislitz said yesterday the lack of super investment in VC was a “critical flaw’’ in the local technology ecosystem.

“The Future Fund should be putting at least 1 per cent into supporting technology and venture at different stages across a whole spectrum of tech,” he told The Australian and Credit Suisse’s Sharing Success forum. “They should be shouting from the rooftops that they are going to do it.’’

“If you look at the weighting of the indexes in America and here, their weighting of tech companies is getting bigger and bigger. So when you create an investment portfolio, you can’t avoid tech exposure. To the extent they have to get more knowledge and spread in doing that, they have no choice. They have to play the game at some point. And they will.’’

Thorney Investments itself is launching a new technology-focused listed investment company. It is looking to raise at least $20 million to back the transformation and recapitalisation of a dormant shell, Australian Renewable Fuels, after the company collapsed earlier this year.

Last month, the Future Fund emerged as the surprise lead investor in a $US50m ($65m) capital raising by US start-up MapR Technologies, which also included Google’s venture capital funds.

Square Peg Capital is currently in advanced ­negotiations with several super funds about backing its new tech fund, which has already raised $150m from local family offices and high net worth investors.

“There is definitely more appetite, more interest, more attention, more focus,” Square Peg co-founder Paul Bassat told the forum. “The super funds were burnt by poor experiences in the previous generation of Australian venture funds 15 years ago. The history of the Australian venture capital has been pretty poor. But the history of Australian technology over the past 15 years has been pretty good.

“If you have pools of tens of billions of dollars of capital, to not have some focus on disruptive new business models emerging frankly makes you negligent.’’

But Mr Bassat — who is also a director of Wesfarmers and serves on the Australian Football League Commission — stressed Australian managers had “no right to ask for money if there are managers overseas who are going to do a better job than us’’.

“It is a global asset class and we need to demonstrate we are able to do this as others do in other markets,’’ he said.