The Asia-focused private equity industry has seen significant growth over the past few years, with funds in the region now accounting for one-quarter of the global total assets under management, according to a report from data and intelligence provider Preqin.
The total assets under management for the Asian private equity and venture capital industry was $722 billion as of December 2017, with $667 billion in capital raised by Asia-focused private equity and venture capital vehicles closed since 2010. And the aggregate value of buyout and venture capital deals completed in Asia since 2010 is $626 billion.
“Asia has always played an important part in the private equity and venture capital ecosystem, but its importance was not fully recognized until our recent research efforts,” Christopher Elvin, Preqin’s head of private equity, said in a release. “Although investors have yet to see the same returns of cash in Asia than they have for North America- and Europe-focused funds, Asia-focused private equity funds’ returns rival those of more established regions.”
The firm also said Asia-focused private equity funds have outperformed their North American and European counterparts in recent years, posting returns of 12% or higher for 2010 to 2015. And the funds hold an estimated $246 billion in dry powder, or assets that have been raised, but not yet invested, which also accounted for 25% of the global total.
Preqin attributed the region’s strong growth to the range of investment opportunities available, and technological innovation, particularly in China. It said Greater China leads private equity and venture capital activity in Asia, with 2,853 fund managers based in the region, nearly double the number of fund managers based in the rest of Asia combined. China also was the largest hub of Asia-based investors, with the country accounting for just under one-third of investors in Asia (32%), while Japan had the second-largest share at 21%.
Preqin’s research also found that despite a year-on-year decrease in the number of Asia-focused funds closed since 2015, the aggregate capital raised has actually risen due to larger funds entering the market. While just 12% of funds closed on $250 million or more in 2013, that proportion has grown to 35% in 2018. Additionally, capital calls reached a record high of $107 billion at the end of 2017, and capital distributions have surpassed $60 billion every year since 2015.
“With record levels of dry powder and aggregate capital raised in the Asian market, the outlook for the industry appears promising,” said Preqin in its report. “Increasing innovation has created more investment opportunities in the region, and in an age of technological breakthroughs, the appetite for innovation shows no signs of slowing.”