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Asia-Based Government Agencies Investing in Private Equity – May 2014

by Ling Yan Teo

  • 19 May 2014
  • PE

Preqin’s Investor Intelligence online service currently tracks 53 Asia-based government agencies with a preference for private equity funds; the aggregate total assets of this investor pool is approximately $346bn. 

China hosts the largest proportion (51%) of Asia-based government agencies with an interest in private equity funds. Due to the rapid urbanization of China local government agencies have instituted developmental objectives that are geared towards the growth of certain industries and special economic zones. As such, they are keen to grow domestic companies through private equity vehicles. South Korea represents the next most significant location, with 21% of investors based there. India, Japan and Malaysia are each home to 6% of this investor pool, while the remaining 10% is split between other countries such as Singapore, Thailand and Taiwan. 

Fund type is highly skewed towards venture capital funds (including stage-specific and generalist vehicles), with a hefty 72% of Asia-based government agencies having a preference for this strategy. The next most preferred fund type is growth (56%), followed by buyout (26%). This inclination by Asia-based government agencies towards both venture capital and growth funds is in line with the preferences of the wider investor community headquartered in the region. Twenty percent of these Asia-based government agencies are receptive to a range of other fund types including mezzanine (8%), fund of funds (6%) and natural resources (6%). 

In terms of geographic preference, 58% of Asia-based government agencies are seeking investment opportunities in China, followed by ASEAN (15%) and South Asia (12%). Overall, a considerable 73% of Asia-based government agencies with a preference for private equity funds have an investment mandate that strictly targets the Asian region, reflecting an unwavering commitment to developing businesses and economies close to home. Conversely, 27% of the investor pool seeks global exposure. Forty-three percent of investors in this pool prefer the Middle East as an investment destination while 29% target Africa. Other target markets include Europe (21%), North America (14%) and Australasia (14%). This shows that Asia-based government agencies have a greater appetite for developing economies as opposed to more mature private equity markets.

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