Asian private equity market growing, opening up and trying new strategies

Private equity investors in Asia are pumping more funds into the sector and increasingly trying new strategies beyond standard growth funding, according to new research by investment tracking data group Preqin.

More money is flowing into Asian private equity funds with more than a third (37%) of investors surveyed saying they planned to commit more capital to private equity funds in 2014, and almost half (48%) plan to keep their commitment the same.

The increased commitment of funds is already being seen in the aggregate fund totals. Six Asia-focused buyout funds have already raised $US10.3 billion in aggregate in 2013, a significant increase from the $US6.9 billion raised by 12 Asia-focused buyout funds in 2012.

With more cash pouring into these funds, Australia could be set for an investment increase with the majority of investors surveyed (60%) saying Asia was presenting the best private equity opportunities.

Australian entrepreneurs are preparing for increased access to Asian investors via the Asian Funds Passport scheme.

The report says the maturing of Asian private equity activities meant the market was increasingly exploring new ways to invest money, with the aggregate capital of the previous strong suit of Asian private equity, growth investment, dropping by $US2 billion, from $US36 billion to $US34 billion in 2013.

Preqin’s chief executive Mark O’Hare says in a statement the report provided evidence of the Asian private equity market’s robust development over the longer term.

“Investors are focusing on a more diverse mix of growth capital, small- to mid-market buyouts and even large buyouts and venture capital – in other words, mirroring the diversity of fund strategy seen in North America and Europe, albeit with more of a focus on growth,” O’Hare said.

Almost half (44%) of the Asia-based investors interviewed for the report said small to mid-market buyout funds were the best private equity investment opportunities globally. This is up from 25% in August 2012.

A quarter (26%) said large to mega buyouts were the best option, up by 17% since August 2012.