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Growth in Emerging Private Equity Markets Challenges Developed Markets – November 2012

by Kamarl Simpson

  • 19 Nov 2012
  • PE

This month’s Private Equity Spotlight newsletter highlights in detail how private equity investment in Asia and Rest of World has grown considerably over recent years. Also, current data held on Preqin’s Fund in Market database suggests that 2012 is likely to represent the third year in succession that annual fundraising for Asia and Rest of World surpasses Europe.

In both 2010 and 2011, Asia and Rest of World-focused fundraising accounted for a greater percentage of capital raised than Europe. In 2010, Asia and Rest of World-focused fundraising represented 23% ($65.2bn) of all private equity capital raised, while Europe accounted for 21% ($59.8bn). In 2011, Asia and Rest of World-focused fundraising represented 25% ($76.9bn) of all private equity capital raised, and Europe accounted for 22% ($66.7bn).

Outside the traditional markets of North America and Europe, Asia is the most attractive region for private equity investment, followed by Latin America. Asia has consistently attracted at least 10% of all private equity capital raised year on year since 2005. In 2011, Asia-focused fundraising peaked, with 221 Asia-focused vehicles reaching a final close, raising an aggregate $54.1bn in capital commitments; this accounted for 18% of all private equity capital raised that year.

Of the vehicles currently in market, both Asia and Rest of World-focused funds are seeking slightly less capital than Europe-focused funds, targeting aggregate commitments of $193.7bn and $205.1bn respectively; this represents 24% and 26% respectively of the aggregate capital targeted by all private equity funds on the road. The largest fund that is primarily focused on investing outside North America and Europe and is currently in market is KKR Asia Fund II. Managed by Kohlberg Kravis Roberts, the fund aims to raise $6bn in capital commitments for management buyouts and growth equity investments, concentrating primarily on Japan, China and Australia.

It is evident that Asia and Rest of World regions are viewed as attractive investment propositions for many LPs, with growing interest in recent years in these regions. The recent turmoil that has prevailed in more developed financial markets has inclined LPs and GPs alike to pursue investment opportunities in the less developed private equity markets in the regions of Asia and Rest of World. There has also been significant growth in the number of GPs based in these regions. As investors gain greater confidence and experience of investing in Asia and Rest of World, the way they access these investments is likely to evolve, and exposure to the region may become a staple in the investment portfolios of many LPs.

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