Financial system inquiry head calls for more dynamic VC market

The head of the Abbott government’s financial system inquiry, David Murray, has called for a more dynamic venture capital market and said technology should be a central focus.

His comments were made at a function for the launch of stage two of the Australian Centre for Financial Studies’ Funding Australia’s Future project in Sydney on Wednesday night.

They come at a time when there has been much community debate around ways to create better VC funds for startups in Australia, including the need for access to super funds. The discussion caught the attention of Communications Minister Malcom Turnbull, who invited those involved to meet with him.

Speaking at the event, Murray said the committee would closely examine the way in which superannuation funds allocate capital.

According to the AFR, Murray questioned why “we don’t have a more dynamic venture capital market, and why we don’t we have a much more highly developed corporate bond market, because you would think within the superannuation system there are some beneficiaries who would need bonds”.

He’s also quoted as saying that technology would be a central focus and he would examine the appropriate regulatory boundaries for new players in the financial services sector.

The call has been supported by the Australian Private Equity & Venture Capital Association Limited (AVCAL).

“The Financial System Inquiry gives us an opportunity to identify how we can reform our policy and regulatory frameworks to foster a more innovative economy that supports the growth and expansion of Australian businesses,” said AVCAL chief executive Yasser El-Ansary.

He said venture capital is very often the critical step in commercialising technological innovations and creating tomorrow’s jobs.

“If we don’t have the right culture for VC to prosper, many innovators will be forced overseas or perish,” he says. “Recent changes to the superannuation policy settings are effectively restricting the flow of superannuation funds into venture capital and that is very much to the detriment of both superannuants and the Australian economy.”

AVCAL’s 2013 Yearbook, released in December last year, highlighted the challenges in fundraising across both the venture capital and private equity industries over recent years. Fundraising for financial year 2012-13 totalled $867 million, down from $3271 million in the year 2011-12.

“There are very clear changes that can be made to the policy landscape to better align the long-term interests of superannuation fund members with the long-term investment horizon required to provide innovation and growth capital for Australian businesses,” said El-Ansary.

“Creating a more dynamic future Australian economy is going to be dependent on our ability to support innovation and back businesses that can create competitive positions in the globalised marketplace.”