Asia is the most populated region in the world and has achieved a notably rapid rate of growth in recent years. Its evolution has pushed it ahead of other emerging markets, giving it the credibility to join North America and Europe as a key geography for investors to target when investing in private equity.
Preqin currently tracks 5,358 investors in the private equity space. Almost half (49%) of these investors have previously committed to Asia-focused funds, or have expressed a preference for investing in them. Fifty-five percent of these are North America-based LPs, 22% are Europe-based LPs, followed by Asia-based investors (18%), and the remaining 6% are investors based in economies outside of Europe, Asia and North America.
The Investor Intelligence online service shows that two thirds (66%) of LPs interested in Asia-focused private equity funds have a preference for venture capital vehicles, making them the most sought after fund type. This is closely followed by 65% of investors interested in buyout funds, and 64% interested in growth vehicles. Sixty-one percent indicated a preference for fund of funds vehicles while distressed private equity, encompassing special situations, distressed debt and turnaround vehicles, account for 42%.
San Diego County Employees’ Retirement Association (SDCERA) is an example of a US-based public pension fund that has recently committed to an Asia-focused private equity fund. It invested $60mn to SSG Capital Partners III, a special situations vehicle that closed at $915mn. George B. Storer Foundation is a US-based foundation, and has recently committed to TPG Asia VI, an Asia-focused buyout vehicle, which held a final close on $3.3bn.
In June 2014, Preqin surveyed 100 private equity investors globally for its bi-annual Preqin Investor Outlook: Alternative Assets, H2 2014 report. It was found that 38% of investors view Asia to be presenting the best opportunities within emerging markets, in comparison to 50% of the investors we surveyed in June 2013 for the Preqin Investor Outlook: Alternative Assets, H2 2013 report. Although the figure has decreased from a year ago, Asia remains the most sought after region of all emerging markets as more investors cited Asia as the current most attractive region for investment. Evidently, the outlook for Asia-focused private equity funds is positive, as significant numbers of LPs are showing an interest in committing to such vehicles. Furthermore, as the region continues to grow and investment opportunities begin to stem from its social, political and economic developments, Asia looks set to hold a substantial amount of private equity investor appetite.