In part 1 of this blog, we investigated the differences between the top tenth percentile and the remaining pool of Asia-Pacific-based private equity GPs regarding a number of parameters: aggregate capital raised in the last decade, strategy preferences, as well as average vehicle sizes by fund type. This time, we take a look at fund manager locations, geographical preferences and dry powder figures as we seek to determine if size matters in the competitive private equity space.
According to Preqin’s Fund Manager Profiles, GPs headquartered in the Greater China region drew in the largest proportion of capital raised by the top 10% of Asia-Pacific-based GPs over the last 10 years, as shown in the chart below. Hong Kong-based firms accounted for 35% of the $202bn aggregated by the group. The island often acts as a platform for GPs to gain exposure to China due to its proximity, availability of supporting services for the private equity industry and strong regulatory framework. It also serves as a gateway to the wider Asia-Pacific economies. Hong Kong’s Chinese counterparts are close behind, receiving 33% of the total commitment. In contrast, Australian firms raised just 9% of total capital, and South Korean and Japanese fund managers attracted 7% each.
All Asia-Pacific-based GPs tend to display the same geographical preferences when it comes to private equity investing. It should not come as a surprise that Greater China is the region that appears the most in GPs preferences; 70% of the top tenth have a preference for investing here and 48% of the chasing group indicated such interest.
Northeast Asia, which includes Japan and South Korea, is the second most targeted destination; it generated 37% of favorable responses from the top 10%, and 25% of the rest of the GPs signified their preference for this market. This is followed by ASEAN (27% and 20% respectively) and South Asia (24% and 20% respectively).
Larger GPs have an estimated sum of $67bn of dry powder, and $49bn of capital has yet to be called by the pool of smaller fund managers. This reinforces the perception of an increasingly competitive investment landscape as GPs across the board – regardless of size – face similar challenges of finding attractive deals, which is in line with the results of our GP survey published in the 2015 Preqin Global Private Equity & Venture Capital Report.