The Asian private equity market has faced a slowdown this year: numbers of deals are down sharply; fundraising has slowed; and Asia’s traditional dominance of the emerging market private equity universe has been diminished.
However, within that slowdown, some nascent trends are giving cause for hope. The emergence of huge home-grown private equity firms, such as Hony Capital, points to a maturation of the market. Hony — with a $6.1 billion five year fundraising total — is now the largest private equity firm in Asia toppling the traditional global heavy weights from their perch. It closed its fifth US dollar fund earlier this year, raising an astonishing $2.4 billion just three months after launch.
At the other end of the scale, newer fund groups are emerging rapidly, backed by LPs looking to get exposure to new markets and sectors that have not been tapped by the larger firms. And despite Hony’s success with its China-focused strategy, it is perhaps the emergence of pan-regional funds that cheers many in the market. “In light of growing investor awareness of opportunities elsewhere in Emerging Asia, and the challenging exit and regulatory environment in China, we anticipate a potential shift away from China-only strategies in favor of a more regionalised approach, consistent with the pattern among many Asian funds being raised today,” says Sarah Alexander, founding president and CEO of the Emerging Markets Private Equity Association (EMPEA).
EMPEA’s annual survey released in August 2012 showed the greater role that regional funds are playing and the diminishing dominance of China focused vehicles. In the period January to June 2012, Chinese funds represented only 23% of the total funds raised by private equity groups. For the same period in 2011, the figure was 53%.
The survey also revealed that total deals done in Asia are declining — China deal making was down 8% over the period, while India saw a 25% decline. However, Asian firms are countering that by expanding into new markets. Hony’s chairman, John Zhao, has recently stated his strategy is to support his investee companies as they take advantage of the global recession to enter into new markets in the West.
To learn more about these trends and how to achieve success in Asia’s private equity markets, Merrill Datasite will be hosting a complimentary webinar on Thursday, September 27 at 10am Hong Kong time. Moderated by Yash Rana, partner and Asia Chairman at Goodwin Procter, it will also feature:
· Stephen Seelbach, managing director, co-head of Asia-Pacific financial sponsors, Morgan Stanley
· Derek Sulgar, managing Partner, Lunar Capital
· Nicholas Norris, partner Kirkland & Ellis
Please click here to register for this complimentary webinar by Merrill DataSite.