Asia-Based Investors with an Increased Interest in Secondaries Funds – November 2013

by Cheng Jia Ong

  • 01 Nov 2013
  • PE

The private equity secondaries market in Asia is on track to grow due to lower valuations and attractive pricing as certain investors may seek to sell their primary fund interests in Asia-focused private equity funds on the secondary market. As such, this marks a rising trend of Asia-based investors that are interested in secondaries funds and it is likely that this trend will contribute to the growing secondaries market in Asia. Preqin’s Investor Intelligence currently tracks 53 Asia-based investors that are actively seeking or have previously invested in secondaries funds. The aggregate total assets of these Asia-based investors with an appetite for secondaries funds are approximately $5.4trn.

A substantial 42% of Asia-based investors with a preference for secondaries funds are located in Japan. South Korea represents the next most significant location at 23% and this is followed by Hong Kong at 13%. China and Singapore are each home to 7% of this investor pool, while the remaining 8% is split between other countries such as Taiwan, Thailand and Kazakhstan. Evidently, it is not surprising that the majority of Asia-based investors with a preference for secondaries funds are primarily located in the developed economies of Japan and South Korea, in which the private equity landscape is comparatively more mature than other Asian countries.

The investor types of these Asia-based investors with an increased interest in secondaries funds are dominated by both insurance companies and pension funds (private and public) at 23% each of the corpus. Following this, banks account for a considerable proportion at 13%.  The LP types which make up between 5% and 10% of investors in this pool are attributed to fund of funds managers, endowment plans and private equity firms, with other investor types each representing less than 5% of the total.

With regards to geographic preference, 56% of Asia-based investors with a preference for secondaries funds display a geographic preference for Greater China. Twenty-seven percent of these investors target ASEAN while 25% of investors focus on opportunities in South Asia. Apart from investing in Asia, close to all investors in the corpus (96%) also look outside the borders of Asia when committing to secondaries vehicles. Of the investors that seek global exposure, a significant 76% target North America as an investment destination for fund commitments, 62% target Europe and 22% target Australasia. This indicates that these Asia-based investors could be attracted to secondaries funds that have a diversified geographic focus which include Asia and Non-Asia regions.

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