AUSTRALASIA: Investing in a risky business

For many investors, the early-stage commercialisation of university research is just too risky to touch. But for big investors such as pension funds, the ability to back a range of projects makes universities' intellectual property a viable investment opportunity. One such investor is the Australian pension fund Westscheme, which has more than A$215 million of A$2.79 billion (US$2.9 billion) in assets committed to commercialising university research.

This is an investment that did not begin overnight and the Westscheme story emphasises the importance of government encouragement, relationships, and systems for providing investors with the right opportunities.

Westscheme chief executive Howard Rosario says he first became interested in investing in research commercialisation in 1994, but it took nearly a decade before the right framework for investment presented itself. That framework was an Australian federal government fund that invited private sector contributions for pre-seed investment in commercialisable research.

Westscheme contributed $5.25 million. Rosario says a key result of that first investment was the introduction of Westscheme to a network of people involved in this early stage of commercialisation.

"Through this we met investment managers who had academic backgrounds," he says. "They knew these opportunities needed to be nurtured in the university environment, but a lot of those things were not being nurtured well. They were taken to market too early, or the people behind them were distracted by the issues of running a publicly listed company."

It was also made clear to Rosario that research investment required a system that linked investors such as Westscheme with a range of opportunities arising from university research. From that first step, the fund went on to enter a range of investments for research commercialisation, with the most recent providing four Australian and one New Zealand university with a five-year $30 million investment fund.

Westscheme has now committed about $215 million to the commercialisation of university research since 2002, including $75 million for actual research. The figure includes more than 100 companies and Rosario says that large number of ventures is the key when investing in research commercialisation.

"Most people look at the risks and think there is money to be made with less risk elsewhere," he says. "We recognise many of them will fail, but because we have got a portfolio of these investments, we will get a return... For the ones that succeed, gosh it is worthwhile."

In fact, Rosario says Westscheme has already had "positive returns" from its commercialisation investments on a whole-of-portfolio basis, though he says that after such a short period of time this is largely a matter of good luck.

* John Gerritsen is editor of NZ Education Review.
John.Gerritsen@uw-news.com