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Asia-Focused First-Time Funds in Market – September 2013

by Valerie Lee

  • 09 Sep 2013
  • PE

First-time funds are an inherent part of the make-up of the private equity fund industry; every active manager needs to have raised a first-time fund and some go on to leave a legacy in the wake of their initial fund offering. First-time funds can be seen as a riskier investment than funds raised by more experienced management teams, due to their lack of proven track record. Asia has proven to be one of the fastest growing and most exciting private equity markets for new managers. Preqin’s Funds in Market shows that there are currently 256 Asia-focused funds in market, of which 83 are first-time funds (excluding funds of funds, real estate and infrastructure funds). These first-time funds are collectively targeting a total of $18.9bn in capital commitments.

Twenty-eight percent of fund managers raising Asia-focused first-time funds are located in India, followed by those headquartered in China (25%), Hong Kong (13%) and Singapore (11%). The US is home to the largest proportion of non-Asia-based managers in the pool, representing 5% of the corpus. The remaining 18% is split between other Non-Asia- and Asia-based fund managers.

In terms of fund type, growth is the most common strategy used by Asia-focused first-time funds in market and it accounts for almost half of the corpus (48%). Venture capital follows closely behind at 37%, with buyout a long way off as the third most utilized strategy by these managers, representing only 7%. The remaining 8% of Asia-focused first-time funds are split between balanced, mezzanine, natural resources and special situations. With regards to the regional focus of these 83 first-time funds, 41% are seeking investment opportunities in Greater China, 40% will look to invest in South Asia, and the frontier market of ASEAN is sought after by 28% of these vehicles. The more established private equity destination of North Asia, only features in the investment preferences of 7% of Asia-focused first-time funds in market. It is worthwhile to note that the largest first-time fund with a focus on Asia is currently being raised by a China-based fund manager. This China-focused buyout vehicle seeks a total commitment of $1.6bn.

Fifty-one percent of Asia-focused first-time funds in market have yet to hold an initial close, with almost two-thirds of these funds targeting the highly sought after regions of China and India. A further 40% of the funds in this pool are at their first-close, and 7% at the second close. The remaining vehicles have held third and fourth closes respectively. A large proportion of these funds have vintage years, representing the year in which the fund made its first investment, of 2013 and 2012, accounting for 58% and 24% of the total respectively. Thirteen-percent are vintage 2011, and the remaining 5% made their initial investments in 2010 or before.

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