Asia’s appetite for private equity investment at the growth stage has led to the strategy being the most utilized by fund managers in the region. Growth funds currently represent 34% of all Asia-focused private equity funds in market; a full 14 percentage points ahead of the next most common strategy, venture capital. The terms ‘Asia’ and ‘growth’ go hand-in-hand both economically and socially. The region benefits from a burgeoning market of rapidly growing, innovative business, as well as a growing social middle-class which is able to drive this expansion of local business opportunities.
Preqin’s Investor Intelligence database shows that there are currently 264 Asia-based investors with an appetite for growth funds. These investors have either previously invested in such funds or are actively interested in doing so. Regionally, Far East is home to the largest proportion of these investors, with 47% of the investor pool located there. This is followed by Greater China (42%) and South Asia (10%); the remaining 1% of the corpus can be found in Central Asia. Looking at this at a country-specific level, China accounts for the predominant number of this investor pool (29%), followed by Japan (17%), South-Korea (16%) and India (10%), no other nation represents more than 10% of this group of investors.
Banks and investment banks form the largest proportion of the Asia-based investors with a preference for growth vehicles, accounting for 16%, followed closely by corporate investors at 15%. Other investor types that have an appetite for growth funds include government agencies (13%), insurance companies (10%), private equity fund of funds managers (10%) and private equity firms (5%). Twelve other investor types, including wealth managers, pension funds, endowment plans and sovereign wealth funds all represent less than 5% of the investor pool respectively.
Managers raising growth funds in Asia will be keen to know that 42% of potential investors will invest in first-time funds, a further 19% will consider doing so and 8% will only invest in first-time funds raised by spin-off teams, leaving only 31% of the investor pool that is unwilling to invest in first-time funds at all. Equally, managers looking to ensure early commitments into their vehicles should also be encouraged by the fact that 89% of Asia-based investors in growth funds will either actively invest in a fund before it has held a first close or consider doing so on a case-by-case basis.