Asia-Based Corporate Investors Investing in Private Equity – October 2013

by Cheng Jia Ong

  • 14 Oct 2013
  • PE

Corporate investors actively invest in the private equity asset class not only due to the allure of high financial returns, but also for the sake of gaining further exposure to related industries which they operate in. With private equity becoming a more accessible investment vehicle in Asia, Asia-based corporate investors increasingly seek exposure to private equity through direct investments in unlisted companies and fund commitments. Preqin’s Investor Intelligence currently tracks 93 Asia-based corporate investors investing in private equity funds, representing 18% of all active Asia-based investors in private equity. The aggregate total assets of these Asia-based corporate investors that invest in private equity are approximately $1.4tn.

China is home to the largest proportion of Asia-based corporate investors investing in private equity at 33%. Japan represents the next most significant location at 24%, followed by Taiwan at 14% and South Korea at 9%. Hong Kong and India are each home to 6% of this investor pool, while the remaining 8% is split between other countries in ASEAN, such as Malaysia, Philippines, Singapore and Vietnam. It is worthwhile to note that the top five corporate investors of the corpus ranked in terms of total assets hail from both Japan and South Korea. The largest of these is Mitsubishi Corporation, a Japan-based corporate investor which has assets under management over $147bn. Mitsubishi Corporation invests in private equity funds in order to form strategic partnerships and while doing so, commits to funds raised by affiliates and third party fund managers.

The fund type preferences of this investor pool is highly skewed in favor of venture capital funds, with a significant 79% of Asia-based corporate investors investing in private equity having a preference for this particular strategy. The next most preferred fund type is growth at 41%, followed by buyout (23%). Twelve percent of these Asia-based corporate investors are also receptive to invest in a wide range of other fund types including balanced, secondaries, mezzanine, funds of funds and natural resources funds. This favor for venture capital funds is largely indicative of the trend seen by Asia-based corporate investors that are likely to establish their own corporate venture capital arms and provide capital to both startups and venture capital funds.              

In terms of geographic preferences, 58% of Asia-based corporate investors investing in private equity have an investment mandate that targets solely the Asia region. Conversely, a considerable 42% of the corpus seeks wider, global exposure when investing in this particular asset class as well. Two-thirds of the investors in this pool that are seeking non-Asia investments in private equity funds target North America as an investment destination for private equity funds while 25% target Europe. This shows that the growing role played by corporate investors in Asia is critical as they seek to strategically capitalize on the developed markets internationally when committing to private equity funds.

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