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US-based Institutional Investors Drawn to South Asia – June 2014

by Alexander Nikas

  • 17 Jun 2014
  • PE

South Asia is one of the most heavily populated regions of the world, experiencing rapid economic growth and market liberalization. Despite political and civil unrest in countries like Afghanistan, US-based LPs continue to actively seek private equity investment opportunities in this region of the world. 

Preqin’s Investor Intelligence currently tracks 241 US-based institutional investors with a preference for investing in South Asia, accounting for 9% of US-based LPs. The database shows 230 US-based institutional investors that not only have an interest in South Asia, but have also previously invested in that region. US-based institutional investors with a preference for South Asia have over $8.8tn of assets under management. On average, these institutional investors (excluding private equity fund of funds managers) have an allocation of $2.4bn to private equity. 

Analysis reveals that these LPs are, on average, slightly below their target allocation to private equity (13.0% of total assets), with an average current allocation of 12.6%. A breakdown by type reveals that public pension funds make up the largest proportion of US-based investors with a preference for South Asia, accounting for almost a third (31%) of the pool of LPs. This is followed by foundations, which make up 21%, and endowment plans which account for 14%. The California Public Employees' Retirement System (CalPERS), the California State Teachers' Retirement System (CalSTRS), and the Washington State Investment Board  are the three largest private equity investors with a preference for South Asia, and together they have an allocation of $70bn to private equity investments. 

The overall economic outlook of many South Asian countries continues to improve largely as a result of advances in the technology, IT infrastructure, and software sectors in countries like India and Pakistan. CalPERS, the largest US-based private equity investor with $31bn allocated to private equity, has previously committed to two India-focused funds which include Samara Capital Fund I, a growth fund with a focus on IT and telecoms, and Mayfield Fund I, an early stage fund which targets investment opportunities in the technology industry. The rapid growth in the technology sectors of these South Asian countries is a significant pull factor for large institutional private equity investors like CalPERS to direct capital to region, and with the development of the tech industry showing little signs of stopping, it is likely that it will continue to fuel LP appetite for the region. 

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