ASIATODAY.ID, JAKARTA – The alternative investment market in Asia is set to experience explosive growth in the coming years, with private capital assets under management (AUM) on course to reach $6tn by 2025, according to the first ever comprehensive ‘Alternative Assets in Asia-Pacific’ report published by Preqin, the global leader in alternative assets data, tools and insights.
The report also indicates that Asia-Pacific-based private capital (excluding hedge funds) dry powder held by fund managers sits at a record $446bn as of April 2021 — up from $416bn in December 2020. The majority (77%) of this capital ready for deployment is held by private equity and venture capital fund managers in the region, followed by real estate (10%).
Private capital is playing an increasing role in asset allocations across Asia-Pacific, as demand to access this fast growing and diverse region remains robust. Asia-Pacific-focused private capital AUM has already expanded almost sixfold over the past decade, reaching $1.71tn in September 2020, with $133bn raised during 2020 alone. Along with $156bn in Asia-Pacific hedge funds as of Q4 2020, the region is fast approaching the $2tn mark. According to Preqin forecasts, Asia-focused private capital AUM will grow at a world beating compound annual growth rate of 28.3% from 2020 until 2025.
A key driver behind the growth of the alternatives industry in Asia-Pacific is venture capital, with AUM of $574bn held by fund managers in the region as of September 2020. Almost 36% of total Asia Pacific-based private capital assets under management are held by venture capital funds — the most prominent strategy in the region. Hedge funds have faced more difficulties: New fund launches in the region — a key barometer of industry health — tumbled over 20% in 2020 to 117 on the back of the COVID-19 pandemic.
AUM growth is being seen across Asia-Pacific, with Greater China’s private equity and venture capital industry maturing fast, with an AUM of more than $1.04tn. This equates to more than 13% of the global total and 61% of capital targeting the Asia-Pacific region. By opening up their innovation ecosystems to global capital and talent and encouraging domestic start-ups to go global, Japan and South Korea are gaining global prominence.
Despite significant growth, navigating Asia-Pacific’s private capital market remains complex. While many uncertainties remain, the industry has learned to play the long game. As the search for global diversification and return-enhancement intensifies, we expect investors to support the continued expansion of the alternatives industry in this fast-maturing region.
Mark O’Hare, founder and CEO at Preqin, said: “Asia-Pacific has been an engine driving global growth for more than a decade now and is in the middle of an historic transformation. Investor demand to access this fast-growing and diverse region remains robust, while structural challenges to deploy capital are easing. The dawn of the Asian Age – or rather the re-emergence of the region’s economic dominance on the world stage – has been widely anticipated.”
Additional key highlights of the Alternative Assets in Asia-Pacific report include:
Australia:
$14bn total dry powder held by Australia-focused private equity & venture capital firms at the end of H1 2020, a new record.
20% increase in total capital raised by Australia-focused private capital funds in 2020 compared with 2019.
Greater China:
Venture capital remains the dominant private equity strategy in Greater China with 46% of total AUM as of September 2020.
As of September 2020, PEVC funds based in Greater China had combined AUM of over $1.04tn.
Japan:
Japan-based private equity AUM focused on buyouts reached $22bn, double the total of five years ago.
Dry powder as of September 2020 stood at $24bn for Japan-focused private equity and venture capital funds combined, up 40% from the previous December.
South Korea:
South Korea private equity AUM has been driven to a record $102bn as of September 2020.
South Korea-focused buyout funds raised a record $17bn in 2020.
ASEAN:
ASEAN-focused PEVC industry assets under management (AUM) stood at a record $33bn as of September 2020, almost doubling in five years.
In 2020, ASEAN saw the completion of 400 venture transactions valued at a combined $8.2bn.
About Preqin
Preqin is the Home of AlternativesTM, the foremost provider of data, analysis, and insights to the alternatives industry. The company has pioneered rigorous methods of collecting private data for almost 20 years so that 110,000+ global professionals are streamlining how they raise capital, source deals and investments, understand performance, and stay informed. Through close partnerships with its clients, Preqin continuously builds innovative tools and mines new intelligence to enable them to make the best decisions every day. (AT Network)