The general lack of activity in the developed private equity markets of North America and Europe, coupled with the poor economic conditions and regulatory and tax pressures exerting a negative impact on private equity investment prospects within these regions are forcing limited partners to seek investment opportunities in alternative geographical regions. The relatively nascent markets of Asia, with seemingly positive economic prospects, have become more attractive for some private equity investors. The recent spate of large Asia-focused vehicles raised by established general partners – such as the Yuan-denominated funds being raised by Carlyle Group and Blackstone Group – suggests that general partners see the prospects for the region as positive.
What of limited partners? Just how prevalent is investment into Asia as a strategy for investors in private equity? Which investor types are most likely to commit to Asia-focused funds, and from which regions are these likely to emanate? Preqin’s Investor Intelligence database of limited partners indicates that just under one-third of investors (32%) have considered or will consider Asian fund commitments. Given the relative maturity of the markets, this compares fairly favourably with the proportion that have an interest in Europe (56%), although less so with the proportion of investors that have an interest in North America-focused vehicles (62%).
Looking at geographical origins of investors with an interest in Asia, the largest proportion of investors is based in North America, representing 39% of the total. Europe follows with 30% and then Asian investors with 23% of the total. In terms of the degree of penetration of investors interested in Asia continentally, 25% of North American investors on the Preqin database will consider or have invested in Asia whilst 30% of European investors have an interest in the continent.
Public pension funds make up the largest proportion of investors with an interest in Asia with 15% of the total. Fund of funds managers closely follow with 14% of the total.
Canada-based Scotiabank Private Equity Investments, the USD 650 million private equity investment arm of the Bank of Nova Scotia, expects to increase its exposure to Asia in the coming years to fulfil its non-North America investment allocation at the expense of its European allocations. The USD 96 billion Teacher Retirement System of Texas recently committed USD 100 million to an Asia-focused fund of funds vehicle, while CDC Group, the USD 4.6 billion UK-government investment vehicle, is a prominent investor in Asia-focused funds.
More information on institutional investors in private equity can be found on Preqin's Investor Intelligence database.