As the Asia-Pacific private equity industry matures, more investors in the region are incorporating the asset class into their portfolios. According to Preqin’s data, there has been a 9% growth in the number of Asia-Pacific-based LPs interested in private equity between 2012 and 2014 YTD. Institutional investors are becoming more sophisticated and increasingly seeing the asset class as an avenue to generate long-term superior returns. Preqin currently tracks 657 Asia-Pacific-based investors with an interest in private equity funds, which comprises approximately 12% of the global investor pool.
The top 100 Asia-Pacific-based investors with a preference for private equity funds have a combined AUM exceeding $22tn and currently have more than $75bn allocated to private equity funds. A significant 42% of these Asia-Pacific-based investors are located in Japan, while South Korea represents the location with the next highest proportion of investors (16%). It is not surprising that the majority of the top 100 Asia-Pacific investors hail from the North-East Asian region, in which a relatively mature private equity market exists. This is followed by China (12%), India (8%) and Australia (6%). The remaining 16% is split between other countries such as Taiwan and Hong Kong, as well as the ASEAN nations of Singapore, Malaysia, Thailand and Philippines.
In terms of investor types, banks account for the largest proportion (36%) of institutions that make up the top 100 Asia-Pacific-based investors with a preference for private equity. Insurance companies (25%) trail closely behind, followed by asset managers (10%), sovereign wealth funds (8%) and corporate investors (7%). Other LP types which consist of 5% or less of investors in this corpus include investment companies, public pension funds, and government agencies.
Fund type preference is skewed towards buyout, with a hefty 69% of the top 100 Asia-Pacific-based investors with an interest in private equity having a preference for this strategy. The next most favoured fund type is growth (59%), closely followed by venture capital (56%). Thirty-seven percent of the investor pool is inclined towards distressed private equity, which encompasses distressed debt, turnaround and special situations vehicles. The top 100 Asia-Pacific-based investors also have a preference for mezzanine (29%), secondaries (24%) and fund of funds (23%).