LP appetite for Asia weakens - survey

Of the 70 respondents, which included pension funds, endowments and foundations, and fund-of-funds, only 7% expressed an interest in country-focused funds – a segment of the market typically dominated by Chinese managers. Pan-Asian funds and venture capital garnered 10% and 9%, respectively. The three Asia strategies occupied the bottom four positions alongside fund-of-funds.

In the same survey two years ago, Asian country funds ranked sixth, having been identified as desirable by 33% of respondents. Pan-Asian funds and Asian venture capital scored 25% and 24%. Sentiment had already begun to turn on country funds and pan-Asian funds 12 months ago, their support plummeting to 11% and 13%. Venture capital remained reasonably popular on 21%.

US middle-market buyouts have ranked first in each of the last three surveys, endorsed by at least two-thirds of respondents. US strategies fill out the top four in the latest edition, with small-market buyout, growth capital, and venture capital. European middle-market buyouts came next.

Asia remains the third most popular geography after North America and Western Europe, but it is losing ground on the leaders. The proportion of investors expressing interest in the region has fallen to 43% from 54% this time last year. North America rose from 91% to 97% while Western Europe fell from 82% to 76%. Two years ago, Asia scored 68%, within 15 percentage points of Western Europe.

Within the region, China has experienced the most dramatic fall from grace, plummeting to 22% from 58% two years ago. Japan now ranks first with 34%, followed by India with 25%. Southeast Asia is fourth with 19%. All three markets have seen relatively small declines in popularity over the past two years; South Korea and Australia are the only ones to register improved sentiment.

More than half of institutional investors are at or just over their target allocations to private equity and looking to maintain or increase those levels. Two-thirds are still heavily focused on re-ups with existing portfolio managers. Most Asian respondents – a large number came from Japan – identified infrastructure, secondaries, and credit as their preferred strategies.

Investors’ biggest fears regarding private equity include geopolitics negatively impacting portfolios, unsustainably high purchase price multiples in the middle market, too much capital pursuing too few attractive opportunities, substantial increases in fund sizes and the risk of strategy drift, and large firms becoming more generalised asset managers and moving away from key investment strengths.

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• Topics
• LPs
• Fundraising
• Performance
• Asia
• Probitas Partners
• China
• Japan
• India
• Southeast Asia
• Australia