Aggregate fundraising for the Asia Pacific region has remained steady this year, as a number of pan-regional players raised impressive sums.
In 2014, to mid-December, private equity firms focused on Asia raised $35.9 billion, an 18 percent increase on the $30.3 billion raised last year, PEI Research & Analytics data showed.
However, while this suggests a rebound, it is a long way from the $63.6 billion raised in 2011, and despite optimistic sentiments from GPs in Asia’s main economies, notably, China, India, Australia and Japan, the region continues to compete with funds globally, with the rebounding economy in the US deflecting capital away from emerging markets.
“From a global perspective, the general sentiment in Asia in 2014 was still cautious but continues to be interesting, compared to the last few years when the global markets were still struggling so there was more demand or interest for Asia,” Vince Ng, partner at Atlantic Pacific Capital in Hong Kong, explained.
“All the alternatives [investors] we speak to on a global basis are coming out with the same context: [they] are getting great returns out of their US portfolio, good distribution and the pipeline of deals is great. While valuations are creeping up a little bit, they are still manageable, and so say [when it comes to their] global allocation, we are going to spend more time looking at those markets.
He adds that LPs generally feel that, “If we need to do something in Asia or emerging markets from an investment perspective, it needs to be something pretty damn compelling.”
While pan-Asian firms have come back into fashion with investors, 2015 will likely see fewer of these funds close after an active 2014.
During 2014, The Carlyle Group, CVC Capital Partners, TPG Capital and MBK Partners were among the funds that raised close to or more than $3 billion for the region. Navis Capital Partners raised around $1.3 billion, while Affinity Equity Partners, which officially closed in January, raised $3.8 billion.
“A lot of pan-Asian funds have done very well, but whether that is sustainable going forward or in the next round of fundraising is [unclear]. For 2015, how many pan-Asian funds will be in the market? I’d imagine a lot less that what we’ve seen in the last year and a bit,” Ng comments.
“There will be a lot fewer successes as well, because a lot of groups and investors have allocated to that space already and they’re now waiting to see how that plays out. There is a lot of dry powder chasing deals, valuations are high and dealflow is not as compelling.”
Nevertheless, private equity firms raising capital for buyout strategies in Asia Pacific raised $21.6 billion to mid-December 2014, a 50 percent jump from the $14.4 billion raised for the same market segment during 2013, indicating that GPs in the region are refocusing their efforts away from minority, growth capital deals.
The data showed that this was the largest amount raised for buyout deals in Asia since 2008, with more funds in the market. In contrast, fundraising for growth capital deals was on par with last year at $11 billion, and far below the levels raised in previous years.
However, the trend may reflect the sentiment of LPs more than managers, as private equity funds in or coming to market are targeting to raise a total of $89.7 billion for buyout and corporate private equity, but still growth capital funds far outstrip the amount, with $144 million targeted by funds with exposure to the region.