What Does the Future Hold for Private Equity Investors in Southeast Asia? – October 2015

by Ryan Soon

  • 06 Oct 2015
  • PE

Investors around the world have been rattled by recent market turmoil; China’s slowing economic growth has cast doubts over whether investors should continue committing their capital to the country and an impending hike in US interest rates could lead to a withdrawal of funds from emerging markets. What does this spell for private equity investors based in Southeast Asia?

Preqin’s Investor Intelligence online service currently tracks 102 institutional investors in the region with an interest in the asset class; this group has collectively deployed $36bn in private equity. Singapore is the financial hub of the region and so it is no wonder the city-state has the largest proportion (56%) of LPs committing to private equity in ASEAN, followed by Malaysia (17%) and Thailand (10%).

Relative to Europe and North America, Asia has had the fastest growing economy over the past two decades. It is no surprise that 90% of ASEAN-based LPs have expressed a preference for Asia as a destination for investment, as shown in the chart above. On the other hand, Southeast Asia has increased its appeal to private equity investors as economic and social developments are making headway: efforts to enhance Indonesia’s infrastructure and financial sectors are progressing; Myanmar is gradually opening up its market to foreign investors, while Vietnam’s strong and accelerating economy is attracting more private capital. Such positivity is why ASEAN is the next most favoured location for this pool of LPs.

Despite slowing growth, China’s transition to a market-driven economy still provides encouragement to investors, with 35% of Southeast Asia-based LPs having an interest in the Greater China region. Thirty percent of ASEAN-based LPs are interested in North America, the traditional birthplace of private equity.

In terms of fund type, growth, venture capital and buyout vehicles generate the highest levels of interest among ASEAN-based investors. Riding on the tailwind of Asia’s economic rise, start-ups and growing companies are fast capturing the attention of investors.

ASEAN-based investors possess $1.9tn in assets under management (AUM), making up just 6.6% of the overall AUM of LPs in the wider Asian region. However, its positive economic outlook means that ASEAN-based LPs can play an increasingly prominent role in the private equity asset class.

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