As the Asian private equity market develops and new regulations are introduced, fund managers based in the region have to adapt to the ever-changing investment environment. Preqin’s Funds in Market data shows that between 2010 and 2014 YTD, the number of private equity funds closed and aggregate capital raised by Asia -Pacific-based managers peaked at a high of 221 funds and $55bn respectively in 2011.
The decline in Asia-Pacific-based fundraising can be attributed partly to the outflow of capital to the recovering economies of Europe and the US, a tightening of regulations in Asia-Pacific as well as a desire by investors based in the region to invest with global names based elsewhere. In a recent development, China Securities Regulatory Commission enacted a requirement for domestic private equity funds to register with Asset Management Association of China. China-based GPs now need to submit information pertaining to their investment portfolios, assets, debts and revenue distribution. The silver lining in Asia-Pacific-based fundraising is that the aggregate capital raised by fund managers this year looks set to match or exceed the $28bn seen in 2013, indicating that a recovery is poised to happen.
In terms of fund type, more venture capital vehicles were raised each year between 2010 and 2014 YTD than any other strategy. The only exception was in 2013, when growth vehicles constituted the largest proportion of number of funds closed. As Asia-Pacific consists largely of emerging markets, much emphasis is placed on developing the economy, so investors often seek venture capital deals as part of their mandates.
From 2010 to the present, the majority of Asia-Pacific-based funds that completed fundraising were launched by China-based GPs, showing the draw of being located in the world’s second largest economy. The introduction of Abenomics in December 2012 has also undoubtedly resulted in a positive outlook for the Japanese economy, which is reflected in the increasing number of Japan-based vehicles that have successfully closed.