Study: LP interest in Asia waned in 2012

LP interest in Asia has dropped slightly year-on-year, particularly in previously popular countries like China and India, according to a recent Probitas survey.

Limited partner interest in Asia has dropped slightly worldwide, driven by falling investor sentiment in China and India, according to a recent Probitas Partners survey that compiled the responses of 126 private equity organisations worldwide, the majority of them LPs.

In China, for example, the waning interest was noticeable. Around 44 percent of overall respondents selected China as one of the most attractive investment markets in Asia in 2012, compared to 55 percent of respondents in 2011. 

India had an even sharper drop, with only 13 percent of overall respondents selecting the country as attractive compared to 30 percent in 2011.

“Since [2007], interest in India [fell] precipitously as investors grew increasingly concerned over lack of exits,” the report said.

Asia remains one of the top three markets worldwide, behind North America and Western Europe, according to the survey. However, this year only 53 percent of respondents considered Asia one of the top three markets going into the new year, compared to 65 percent in 2011.

Prior to 2012, India, Brazil and China always held the top three positions of interest in emerging markets. This year, however, India has fallen to seventh place in the survey, while Southeast Asia has risen from fifth to fourth place.

Fundraising in Asia has also been “under pressure”, the survey added. Asia fundraising totaled only $31 billion across 76 funds in 2012, compared to $43.2 billion raised across 126 funds in 2011, according to Private Equity International’s data division.

The Probitas survey concluded that the slowing numbers show that investor interest in emerging markets in general has decreased.

“While the growth story in emerging markets over the next 25 years seems strong, what will happen in private markets over the next five years is much more uncertain,” the report said.