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Asia-Pacific-Based Private Equity GPs: How the Top 10% Differ from their Continental Peers (Part 1)

by Jie Xin Choo

  • 17 Jun 2015
  • PE

Does size matter? This is an age-old question facing investors when deciding which private equity fund managers they should entrust their capital to in order to fulfill portfolio objectives. Larger GPs can take advantage of their vast network and experience in each front, while smaller GPs are keen to highlight their specializations in niche areas. Preqin’s Fund Manager Profiles currently tracks information on 1,392 Asia-Pacific based private equity firm, which have raised a total of $360bn in funds over the last 10 years. 

The top 10% of Asia-Pacific-based private equity fund managers by total capital raised in the last 10 years have each accumulated more than $1.25bn in the last 10 years. According to Preqin’s Funds in Market, this group collectively drew $202bn in capital from institutional investors worldwide through 327 funds. Comparatively, the remaining 90% of its continental peers aggregated merely $156bn via 1,286 private equity vehicles. This reflects the notion that top fund managers hold disproportionate power in the investment landscape as LPs generally seek GPs with established track records. 

The strategies that both sets of managers prefer to pursue exhibit one of the major underlying differences between the two. Larger GPs possess the financial resources, expertise and manpower to conduct larger deals that are usually associated with growth and buyout; indeed, 66% and 52% of the GPs forming the top tenth percentile by total capital raised in the last decade indicate a preference for these respective fund types. In contrast, venture capital opportunities generate the highest level of interest (63%) from the remaining 90% of the managers’ pool, as these investments allow smaller GPs to work within their limited resources. 

A look at average fund size by strategy provides another angle. For growth vehicles, the top 10% of Asia-Pacific-based managers raised a mean of $749mn per fund, in contrast to an average of $152mn raised by the other 90% of GPs in the last decade. Similarly, with respect to buyout and venture capital vehicles, the leading pack closed at a higher amount on average than the chasing group: $924mn versus $204mn for the buyout strategy, and $441mn versus $73mn for venture capital funds. The ability of larger GPs to attract more capital per fund gives them a competitive edge when sourcing and bidding for deals; smaller GPs raising similar vehicles will have to back their claims of specialized skills to find attractive opportunities that may have fallen off the radar of their bigger counterparts. 

In the second part of this blog, we will investigate the dry powder figures and geographical preferences for each group of fund managers. 

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