Asia Pacific is also attracting more private equity investment according to a new industry report
Investors seeking alpha from alternative investments are increasingly looking to Asia Pacific.
A new report from industry analysts Preqin shows that Asia Pacific- focused private capital AUM has more than doubled since 2018 and the region has overtaken North America as the most active for venture capital (VC).
The Business Development Bank of Canada has recently given its assessment of the Canadian VC landscape, showing resilience and evolution.
This comes even as investor sentiment has weakened on Greater China, especially for private equity. Funds focused on these assets raised just over US$9 billion in 2022, a significant slump (89%) from near $86 billion in 2021.
“Despite the macroeconomic headwinds that have swept the world, Preqin maintains a positive outlook on APAC, supported by the fundamental growth potential in several large, under-represented markets,” said Angela Lai, the firm’s head of APAC and Valuations, Research Insights.
However, it may be other markets in the region that get more attention than China in the near term.
“APAC-focused investors currently show increased caution toward China, shifting interest to other markets, which may drive growth in the region pending an economic rebound in China,” added Lai.
VC gains
Asia Pacific has become the most active region for venture capital, overtaking North America for the first time since March 2020.
By the end of the first quarter of 2023, 46% of VC investors were targeting Asia Pacific, up from 32% a year earlier. The region is the only major region in which Preqin expects improvement in the long-term investment returns against the previous five-year period.
VC deals related to semiconductors, integrated circuits, or electric and hybrid vehicle value chains in Asia Pacific reached $24bn in 2022, nearly double that of 2018, and their share of deals have been increasing.
Asia Pacific is also expected to outperform other regions for private debt fundraising, with private debt assets under management already above expectations at $95bn by the end of Q3 2022.
While this is still relatively small (just 6% of the global total, the fast growth is key, up by 28% year-over-year.
There is also strength in the region’s real estate AUM, which grew from $183 billion in 2021 to $209 billion last year. From December 2021 to September 2022, dry powder grew at a higher rate of 20% compared with 11% for unrealized value.
Overall growth potential
Asia Pacific’s combined private equity and venture capital AUM only represents 5.5% of its total equity market.
This is higher than it was five years ago (3.3%) but is still low in comparison to 7.8% in North America and 6.4% in Europe, suggesting further growth potential.
The region’s significantly lower share of global private capital AUM, when compared to its share of global GDP, supports this view.
