Fundamental – Issue seven

Welcome to our first edition of Fundamental for the new financial year. 

In this edition, we feature major funds transactions, including a focus on issues faced by listed fund managers, across both capital raising and M&A transactions. With AI and anti-money laundering and counter terrorism financing (AML/CTF) the topic of most conversations, we also look at key issues to be considered by funds investing in a business with AI exposure along with the latest developments in AML/CTF.

We will shortly publish our Major Funds Transactions in Australia: a Guide for Funds Managers, a new guide focused on key challenges in complex funds transactions, and we encourage you to sign up to receive your copy.

It is no secret that Australia’s public markets have not experienced the same growth as private markets in recent years, with IPO activity in Australia reaching its lowest point in over a decade. While the disproportionate flow of capital into private markets in Australia (consistent with global trends) has been a key driver of private M&A activity, there has been regulatory and industry acknowledgement of ensuring that Australia’s public markets still operate effectively to facilitate primary and secondary raisings, accessibility of public participation and value setting. 

Recent months have seen the green shoots of structural change (such as ASIC’s trial to fast-track IPOs) towards recalibrating the dynamic between the two markets, following industry consultation and feedback on the structural barriers that may present challenges for the entry and continued participation of companies in Australia’s private markets.  

While product development and the pre-launch phase are taking longer than they may have historically, given geopolitical developments and uncertainties, and regulatory nervousness surrounding pockets of private markets, new product launches and capital inflows across various asset classes seem to be trending upward compared to recent periods. In particular, the desire of private capital to access what were traditionally institutional opportunities has spurred the use of syndicated side cars, syndicated co-investment vehicles, and feeder funds.

For the real estate sector, the MSCI Real Estate 2025 briefings hosted by the firm in Melbourne and Brisbane recently revealed positive signs across most asset classes and geographies (with Victoria still posing challenges, at least in the short term). In particular:

• Recovery: while recovery has occurred at varying rates across asset classes and geographies, we are beginning to see signs of a more consistent trend of recovery across real estate asset classes.
• Asset selection: the impact of asset selection is the heavy-weight factor in performance when compared to asset market trends. Getting the right asset, rather than an asset in the right market, is key.
• Foreign capital preferences: offshore capital is contributing significantly to major city office market growth more than any other asset class, with foreign capital focussed more on office assets and domestic capital more heavily investing in retail opportunities. Alternatives, such as data centres, remain popular but with capex putting pressure on returns in some asset classes.

We hope you enjoy the latest edition of Fundamental, and we look forward to your feedback.