Asia-focused private equity fundraising on track for a down year

Private equity and venture capital funds focused on Asia raised $34.01 billion in the year to July 24, setting up the fundraising total for 2024 to fall short of the $76.31 billion accumulated in 2023.

Quarter over quarter, the amount of capital raised rose slightly, while the number of funds closed fell. Asia-focused funds raised $17.69 billion in the second quarter, up 8.8% from the same period a year earlier. The number of funds closed plunged to 50 in the second quarter from 161 in the year-ago quarter, according to S&P Global Market Intelligence and Preqin data.

The China factor

Asia-focused private equity fundraising totals have been falling since reaching $306.82 billion in 2021, reflecting the multiyear decline in the global fundraising market.

Ricardo Felix, partner and head of Asia-Pacific at private markets placement firm Asante Capital Group LLP, attributed the regional decrease to trade tensions between the US and China that resulted in investment restrictions.

"There's been nonstop executive orders refraining US investors from deploying into China, making it difficult for somebody to justify the risk of deploying American capital into China. Europe has followed suit to an extent," Felix said.

“Several Chinese GPs have historically depended on US capital, particularly the endowment and foundation community, over the past few cycles of capital raising," he said. "However, US LPs have consolidated their GP portfolio and/or dramatically reduced, or fully paused, their exposure to China private markets.”

Additionally, US state governments have pressured pension funds to divest from Chinese-owned companies.

As a result, roughly half of the private capital earmarked for Asia that does not have to be deployed in a specific geography circled back to the US and Europe, while the other half went to other geographies in Asia, such as Japan, India and Southeast Asia, Felix said.

– Read about US-backed funding rounds in China. – Catch up on private equity entries in the second quarter. – Explore more private equity headlines.

Accumulating dry powder

The accumulation of dry powder — capital raised but not yet invested — is another factor limiting fundraising in Asia. If existing capital is not being deployed, investors are likely hesitant to provide more capital.

Globally, private equity dry powder grew to a record $2.62 trillion as of July, according to Market Intelligence and Preqin data.

"Certain [general partners] have been able to afford holding on to this capital a bit longer and really squeezing that investment period so they don't have to come back to a market environment which is perceived to be not very beneficial for fundraising," Felix said.

Fund closes, launches

From Jan. 1 to July 23, nine Asia-focused private equity funds have raised at least $1 billion at their final close.

The largest fund closing was from CVC Capital Partners PLC and CVC Capital Partners Asia, which raised $6.8 billion for the CVC Capital Partners Asia VI fund. The vehicle seeks to make control, co-control and partnership investments in consumer and services companies across the continent.

The second-largest fund closed was TPG Capital LP and TPG Asia Inc.'s TPG Asia VIII fund, which raised $5.3 billion. TPG said the fund will pursue a geographically distributed strategy of growth investing.

The largest fund still raising capital is managed by Vishuddha Capital Management LLP and InCred Alternative Investments, which have pulled in $60 million so far for InCred Growth Partners Fund I.