For mature companies, growth capital is an important investment type that helps them to expand into new markets, restructure their balance sheet or complete an essential acquisition. According to Preqin’s Funds in Market online service, private equity funds raised $80.4bn in capital in Q3, and from this total, 10% was accumulated by growth funds. North America-based fund managers raised $4.1bn while private equity houses in Europe and Asia raised $1.4bn and $1.3bn respectively. This blog looks at the number of private equity firms that provide growth capital exclusively and analyzes their geographical location.
According to Preqin’s Fund Manager Profiles online service, there are currently 3,079 private equity firms which offer growth financing as part of their investment strategy. Of these firms, 32% focus exclusively on making growth equity investments, with the largest number (299) based in North America. As shown in the chart above, Asia- (279) and Europe-based fund managers (267) are not far behind. From the fundraising statistics, Asia has raised more capital from growth-equity funds in the last 10 years than any other region, representing 40% of the $244bn total capital raised. This displays a large investor appetite for Asia-based investments, indicating that investors feel Asia has been presenting the most growth opportunities over the last decade.
The top five private equity firms – ranked by aggregate capital raised over the last decade – that exclusively provide growth financing are Summit Partners, JP Morgan Asset Management, CDH Investments, Technology Crossover Ventures and PineBridge Investments. In the past 10 years these firms have raised an aggregate $43bn in capital, of which only CDH Investments is headquartered in Asia.
CDH Investments was established in 2002 and is the youngest firm in the top five. As growth investors they are industry agnostic, but the firm seeks the best companies which can demonstrate strong growth prospects and are market leaders in China. Earlier this year, the firm closed their growth-equity vehicle, CDH Fund V, on $2.6bn, with the vehicle looking to invest in industry leaders that actively work towards helping China’s economy to grow, in order to increase their consumer purchasing power.
Asia-based private equity firms may have topped North America in raising the most capital over the last decade, but 36% of this capital was collected in North America. With three more months to go until the end of the year, North America may regain its place as the top growth investor, but it is nonetheless encouraging to see competition between two of the largest continents.