PEI 300: The mid-market grows in Asia

The region’s growth story, urbanisation and rising middle class are luring private equity capital.

Asia-Pacific-headquartered firms are taking up a larger share of global fundraising. Firms in the region amassed $142.6 billion over the five-year period to March 2019, compared with $128.5 billion in the previous year’s PEI 300 ranking.

The main attraction: Asia’s rising middle class and its increasing purchasing power, coupled with the region’s increasing maturity as a private equity market. Regional powerhouse China, for instance, has gradually shifted from a growth to a buyout play due in part to the country’s slowing economy, declining interest in traditional industries, succession planning among first-generation entrepreneurs and newly available capital.

Private equity performance in Asia has been solid; industry returns rose to a 12.4 percent median net internal rate of return in 2018, and top-quartile funds with vintages between 2012 and 2015 are forecasted to deliver net IRRs above 20 percent, according to Bain & Company.

Limited partners are taking note and ramping up their commitments to the region. Teachers’ Retirement System of the State of Illinois revealed in its trustees meeting last year that it will focus on Asia in 2019 as part of its private equity tactical plan. Christopher Ailman, CIO of California State Teachers’ Retirement System, told PEI in May the pension could double or triple its less than $2 billion exposure to Asia in the next three to five years.

Respondents to the latest EMPEA Global Limited Partners Survey indicated they view South-East Asia, China and India as the most appealing investment destinations across 10 emerging markets globally.

Asia stalwarts have enjoyed some impressive leaps in this year’s list. Beijing’s Hillhouse Capital (29) became the top Asian firm after jumping 127 places on the back of a $10.6 billion fundraise, the largest sum ever collected for a pan-Asian vehicle and around 15 percent more than KKR hauled in for its Asian Fund III, which closed on $9.3 billion in June 2017.

Hong Kong’s Baring Private Equity Asia (33) climbed 32 places after raising $11.8 billion over the past five years and its compatriot PAG (41) rose 57 places.

This year’s PEI 300 also includes new joiners from Tokyo, Mumbai and Singapore. Marunouchi Capital (217) entered the rankings despite closing its second fund below target in October.

Mumbai’s ChrysCapital (245) entered the list for the first time after climbing 209 places from last year’s list. The firm – which has raised around $1.5 billion over the period – closed its eighth India-focused vehicle in January at $867 million, above its $850 million hard-cap.

Shanghai’s C-Bridge Capital (238), which provides growth capital, late-stage and mature-stage investments for healthcare businesses, debuted with a five-year fundraising total of  $1.5 billion, boosted by the $850 million it raised for its  third healthcare fund in May after raising its hard-cap. It’s already back in market with Fund IV.

Singaporean real estate behemoth GLP (232) also made a dramatic entry to the world of private equity in July by raising 10 billion yuan ($1.6 billion; €1.3 billion) for Hidden Hill Capital, a fund targeting Chinese logistics companies.