Call for efficient capital streams

The federal government's financial system inquiry provides the opportunity to encourage superannuation funds to back private equity and venture capital projects, a submission to the review recommends.

The Australian Private Equity & Venture Capital Association Limited (AVCAL) says that at a time when capital investment is slowing in the mining sector, Australia will be relying more on the efficient deployment and allocation of capital in the non-mining sectors.

AVCAL chief executive Yasser El-Ansary says private equity funds are currently invested in less than two per cent of a potential investment pool of up to 30,000 businesses.

"For Australian businesses that don't have access to debt financing from banks, venture capital and private equity funds can help to provide capital and skills to expand business operations and deliver growth in productive output and employment," Mr El-Ansary said in a statement.

He said successful Australian companies like Cochlear got their start with venture capital backing in their early stages of development.

The domestic superannuation industry is worth $1.75 trillion - growing to an expected $6 trillion by 2037 - yet it is estimated to have just $17.6 billion allocated in private equity, or just 1.2 per cent of the total, of which only $9.6 billion is invested in Australia.

"There is a very clear opportunity to remove roadblocks that deter some superannuation funds from backing private equity and venture capital firms to invest in Australian businesses," Mr El-Ansary said.