Fundraising climate dampens Asian debuts

Maiden fund closings in Asia were down significantly in terms of number and value in 2012, according to PEI data.

Far fewer first-time funds in Asia closed in 2012, reflecting the difficult fundraising environment in the region.

According to Private Equity International’s data division, in 2012, 14 first-time funds closed, down from the 35 that closed in 2011.

Total amount raised plunged more than 600 percent. In 2012, first-time fund closings raised $1.9 billion, compared to 2011 when the total amount raised was $13.7 billion.

In China, only two maiden RMB funds closed in 2012, compared to eight the previous year.

“As fundraising gets more challenging, it’s easier to put money to work in known stories,” said Niklas Amundsson, managing director of MVision Asia, which heped Equis Funds Group raise its first fund last year. “First-time funds suffer more than anything else because they have no re-ups.”

Conrad Yan, partner at Campbell Lutyens, which helped Ascendent Capital Partners close its first US dollar fund last year on $365 million, added: “The fundraising market globally has become very difficult and there’s a flight to quality. Only the very best GPs in the right category and the right structure will be able to raise a first time fund.”

According to PEI's data, fund size also fell significantly. The largest fund raised in 2012 was Equis Funds $647 million vehicle. In fact, the vast majority of new entrants were venture capital funds. 

By comparison, the previous year, four debut funds raised more than $1 billion each. The largest among them was RRJ Capital’s $2.3 billion vehicle. 

In 2103, Amundsson expects more first time fund closings, particularly in Southeast Asia, as many have had first closes in 2012. However, the trend is toward sub-$1 billion funds in Asia. 

“If look at where the market is today, the preference is for smaller funds up to about $750 million. In Asia it’s especially difficult to raise a larger fund unless you’ve got some real strong backers,” he said.

To raise a large fund, a firm needs first to get enough demand, added Yan. “But even if you have the ability to raise the capital, your investors may not want you to raise such a large fund. The whole global fundraising environment has become more difficult than before.”