Austrian pension funds to invest in PE

A change in Austrian pension fund legislation is set to boost the amount of private equity funding available from the Austrian market.

The Austrian government has passed a new law allowing Austrian pension and insurance funds to invest up to 5% of their assets in alternative asset classes, including private equity allocations.

The liberalisation of pension fund investment is part of the Austrian government’s aim to reform capital markets in Austria, said Thomas Jud, managing director of the Austrian Venture Capital Association, AVCO. He added that it will take some time for the Austrian private equity market to see the benefit of the reforms, as pension funds in Austria do not have experience of investing in that form of asset class. “Austrian pension funds have a long way to go as they are not yet fully funded. There will be a switch from the current pay-as-you-go structure to a more fully-funded base of funds in Austria, but this will take time,” he said.

Traditionally, Austrian companies have been more confident with principal loan financing rather than raising equity capital through strategic partners. For this reason the Austrian private equity market is still in a phase of growth, says Jud. Last year total funds raised reached euro234.6 million, compared to euro183 million the previous year, according to the European Venture Capital Association. Total investments in 2000 reached euro163.1 in 151 deals, compared to euro89.3 million in 91 transactions the previous year.

The most significant deal so far in Austria this year is probably Vienna-based Kiwwi CEE Holding AG, says Jud. The company completed a second round of financing in early April totalling euro41 million. Kiwwi’s primary focus is offering voice telephony services over Internet protocol to small to medium sized enterprises (SMEs) in Central and Eastern Europe.

AVCO was set up in April this year and is currently working on its first survey of the Austrian private equity market for 2001, due out in March next year. The association has 21 full members and 11 associate members.