Asia funds fall short of target

Funds targeting Asia underperformed in the first quarter compared to other geographies, largely due to changing China sentiment.

Funds in market with an Asia-Pacific focus raised $5.4 billion during the first quarter of 2013 but collectively they had been targeting $6.7 billion, according to data from the Research & Analytics division of Private Equity International.

Global funds, however, exceeded their $14.7 billion target and raised $18.8 billion. Other funds with a geographic focus on North America, pan-Europe and Latin America also exceeded their target amounts in Q1. 

Sources attributed the decline is Asia fundraising to changing sentiment about China and to some extent India.

“The last couple years, China really drove Asia fundraising and there has been a real slowdown in terms of appetite,” said Javad Movsoumov, executive director of UBS private funds group in Singapore. “Recent events and the lack of liquidity tends to put LPs into a pause.”

Niklas Amundsson, partner at MVision Strategic Asia, added that investor sentiment toward China and India has become more cautious over the past year due to the lack of distributions back to investors, which is connected to the troubled IPO markets. 

Asia funds miss targets in Q1 

Geographic Target    Actual
focus (US$bn) (US$bn)

Asia-Pacific $6.7 $5.4
North America $18.1 $23.3
Pan-Europe $9.3 $9.9
Global $14.7 $18.8

Source: PEI’s Research & Analytics division

“Particularly in China, lots of investors already placed their bets, so they are in wait-and-see mode to see which GPs are going to return money before they invest in new managers.”

Some investors have also started to put China fund manager performance in a global context. US mid-market fund managers, for example, have had relatively stable returns across the cycles over the last 15 years, he said. Few firms in Asia can show the same track record. 

“Instead of saying this is probably one of the best managers in China and I have to back it, some investors are saying the China manager – on a global basis – doesn’t perform as well.”

PEI’s data also showed that there were 417 Asia-Pacific-focused funds in market collectively targeting $195 billion, second to the 552 North America-focused funds targeting $204 billion.

Amundsson believes the full year 2013 will be challenging for Asia-focused funds in market, which may not meet their collective target. “In general, GPs with a differentiated strategy and track record will still be able to raise capital. For more average GPs, it will remain difficult.”