Asian private equity funds have become an important portfolio constituent for global investors, who see Greater China as the region’s brightest spot for PE opportunities, finds a survey by data provider Preqin.
Its poll of existing private equity investors globally found that 74% have up to half of their PE portfolio invested in Asia. A further 16% have 76-100% of their PE investments in Asia, although Preqin points out that the “vast majority” of these bullish investors are based within the region.
Greater China is viewed as offering attractive PE opportunities, as indicated by 58% of investors, followed by India (38%). However, their popularity has dropped from 68% and 61%, respectively, in last year's poll, with investors perceiving Vietnam and other fast-growing Asian markets as having better prospects.
Growth capital funds – which typically invest in companies through the purchase of minority stakes – are the most favoured type of Asian PE fund, as cited by 54% of respondents.
Conversely, only 3% viewed Asian distressed funds as providing attractive opportunities, with investors believing that better distressed prospects were in Europe and elsewhere. Asian mezzanine and secondaries vehicles each garnered just 1% in terms of investor preference.
Preqin points out that investor interest in the overall Asian region has grown in recent years, fuelled by fast-growing markets and the maturing of the domestic private equity sector. One-third of PE investors plan to increase their allocation to Asia over the next 12 months, while 65% will maintain their existing level of exposure to the region.
Investors based within Asia have a healthy home bias, with 86% preferring to invest in Asia-focused private equity funds. They are also willing to invest in flagship funds launched by new Asian PE managers, with 38% expressing interest in doing so, and an additional 19% willing to consider an allocation to such a vehicle on a case-by-case basis.
Another notable trend is the prominent involvement of Asian sovereign wealth funds. They account for more than 10% of the $21 trillion in assets held by the pool of global investors who allocate to Asian private equity.
Other notable allocators include corporate investors, which represent 18% of the Asian PE investment base, banks and investment banks (14%), insurance companies (12%) and foundations and endowments (8%).