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Asian Private Equity Feels The Big Chill In 2016; Venture Capital Funds Remain Buoyant

Tom Burroughes

16 September 2016

The pace of fundraising by private equity firms in Asia has decelerated sharply so far this year compared with the amount of activity reported in 2015, while venture capital money-raising has proven more robust, according to research firm Preqin.

Fundraising has fallen in all regions of the world, with the aggregate capital raised by Asia-based private equity firms at $19 billion so far this year, far below the total seen in 2015, at $47 billion.

“2016 has so far represented something of a slowdown in activity for the Asian private equity market. Fundraising remains well down on the levels seen in 2015 and buyout deal activity is also struggling for momentum, as the market attempts to recover from the sharp economic downturn in China last year,” Preqin’s chief executive, Mark O’Hare, said of the figures.

“Overall, the fundamental question for the private equity industry in Asia is whether it can replicate the levels of capital we have seen distributed to investors from funds in North America and Europe. Fundraising and the exit environment are the biggest key concerns cited by fund managers in the region, which suggests that they understand the industry is at a crux: if it can offer real returns to investors, then Asia stands to win a permanent place in global LPs’ portfolios,” O’Hare added.

China-based private equity funds, a driver of the private equity market in Asia, have secured $12 billion so far this year, well down on the $32 billion and $34 billon raised in 2014 and 2015 respectively, Preqin said in a report.

Similarly, South Asia-based fundraising is yet to surpass $300 million in 2016 so far this year despite raising $3 billion last year. The same trend can be seen in private equity-backed buyout deal activity; aggregate deal value in 2016 so far is just $12 billon, less than a quarter of the record $52 billion deal value recorded in 2015. 

Deal value in China has seen the biggest decline, from $31 billion in 2015 to $5 billion this year, while in ASEAN countries aggregate deal value has fallen from $4 billion last year to $700 million in 2016.