The 2011 edition of the Global Venture Capital and Private Equity Country Attractiveness Index has ranked Australia seventh out of 80 participating countries, behind the United States, the UK, Canada, Singapore, Switzerland and Japan.

 

The Index, which follows the original prepared for 2009/10, was produced by an international team of researchers sponsored by the IESE Business School at the University of Navarra and Ernst & Young.

 

The index evaluates countries with respect to their criteria for international venture capital and private equity allocations. Key drivers for the attractiveness of a country for investors are:

  • Economic activity;
  • Depth of the capital market
  • Taxation
  • Investor protection and corporate governance;
  • Human and social environment; and
  • Entrepreneurial culture and deal opportunities.

 

Each of these key drivers is disaggregated into appropriate sub-categories. Three indices are provided to give an overview of the venture capital and private equity investment environment, as well as an index for each of the venture capital and private equity segments.

 

Australia achieved a ranking of 90.2 compared with the United States’  100. It has not changed its position in the ranking since 2007. The most improved economies in that period are Brazil, Indonesia and Saudi Arabia.

In the SWOT analysis undertaken by the study, Australasia was assessed as having strong innovation and R&D capacity; democratic and stable political, regulatory and legal environment; and

a strong economy supported by sound banking and capital market regimes.

Its weaknesses were identified as low tax incentives and patchy venture capital and private equity performance.

Opportunities included a strong stock market culture; PE exits and a maturing secondary market, and a recovery mergers and acquisitions market.  Threats were presented by an upward bias of interest rates with inflation; and increasing competition from well-funded corporates.'

 

In its outlook for Australasia, the report concluded:

  • There will be pressure from limited partners (LPs) to exit investee companies;
  • The region will have high interest rate environments and generally strong
  • currencies;
  • Financing and acquisition opportunities are expected to increase;
  • Strong economies will support corporate profitability and generate good short-term growth prospects.

 

The report can be downloaded at http://blog.iese.edu/vcpeindex/download/.