More funds sprout in Asia, but LPs still want North American PE

  • 44 pct of funds in market target Asia, 37 pct North America
  • North-America-focused funds target more total capital
  • VC funds had most successful quarter in six years

GPs are raising more and more Asia-focused funds, but LPs remained focused on pursuing North American private equity opportunities, according to recent research from Preqin.

In its latest quarterly report on PE and venture capital, Preqin found that 44 percent of all funds in market are targeting Asia, including six of the 10 largest funds, compared with 37 percent of funds primarily targeting North America.

At the same time, 52 percent of investors plan to commit to North-America-focused funds, while just 31 percent will target Asia-Pacific.

LPs who want to buy into North American funds aren’t, however, necessarily out of luck.

Those funds, while outnumbered, are still targeting a larger aggregate fundraising number than Asia-focused funds.

As of October, the 1,737 Asia-focused funds in the market are targeting a combined $308 billion, while the 1,438 North America-focused funds are seeking a combined $472 billion.

In the fourth quarters of 2016 and 2017, North American funds were both more numerous and had a higher aggregate fundraising target compared with Asia-focused funds, according to Preqin.

Funds that closed also favored North America in the recent quarter.

GPs closed 126 North American funds, raising a total of $81.6 billion. The 39 Asia-focused funds that closed in the quarter raised just $10.5 billion. But the Asia-focused funds in the market now include some very large funds, including:

  • SoftBank Vision Fund, targeting $100 billion;
  • China Structural Reform Fund, which held a first close on 131 billion yuan (CNY), or $20 billion, and is seeking CNY 350 billion ($53 billion);
  • China Integrated Circuit Industry Investment Fund II, targeting CNY 200 ($28.8 billion); and
  • China State Owned Capital Venture Investment Fund, targeting CNY 200 billion ($28.8 billion).

Asia also gained momentum in terms of deal size over the past quarter.

Overall, PE-backed deals completed during Q3 were worth an aggregate $93 billion, a 28% decrease, Preqin reported. In Asia, however, overall deal value rose to $13 billion for Q3, up from $9 billion in Q2 and $6 billion in Q1.

The number of private equity funds in market reached a record of 3,921 as of the start of the fourth quarter, with an aggregate capital target of $956 billion, Preqin said. The majority of those funds — 2,326 —  are venture funds, though buyout funds are seeking more capital in aggregate.

While buyout funds remained popular, venture funds had their most successful quarter in six years, with 101 funds securing $18 billion, according to Preqin. More than half of investors surveyed plan to place capital in venture strategies in the coming year, Preqin reported.

Asia also dominated the largest venture capital deals, according to Preqin. The five largest VC commitments all went to Asian companies, with four in China and one in Singapore.

The portfolio companies receiving the largest VC investments were Hangzhou Mouth Phase Communication Network Technology Co Ltd, Grab Holdings, JD Finance, China Media Capital Inc and Meituan-Dianping, according to the report.

Action Item: Download a PDF of the report here.