Five trends worth watching

According to AVCJ Research, around $45 billion has been invested so far this year, compared to more than $66 billion for 2012 as a whole. The 2007 peak of $98 billion lingers as a distant memory. Fundraising has also fallen, with $34 billion committed to 233 funds in the first 10 months, short of the $53 billion that entered 313 vehicles in 2012.

These are indeed difficult times, leading more than a few observers to predict a gloomy future for private equity. I take the contrarian view. Based on conversations with many LPs and GPs, here are some bright spots to watch out for in 2014.

• The stabilization of the Chinese economy: It is clear that China will continue to be one of the greatest creators of private equity returns in the next decade. Although the recent slowdown has caused a few problems and numbers coming out are decidedly mixed, the worst seems to be over. GPS are on the prowl and there is more optimism over exits...

• The return of the Chinese IPO: At time of writing, China's securities regulator had yet to resume IPO approvals, although we're told there may be some developments during or after the Communist Party Central Committee meeting, which is scheduled to begin on November 9. Hopefully not long after reading this, you will hear some good news. Meanwhile, there are signs of life in Hong Kong and the US, with VC-backed companies such as Boyaa, Qunar and 58.com all getting listings off the ground. Alibaba Group's IPO is eagerly anticipated. This is good news for any investor with an interest in China's venture capital and minority growth capital spaces.

• Buyouts in Japan: For a number of years, GPs have been hoping that Japan would recover and open up more to private equity investment. Guided by the three arrows of Abenomics - although the third, which involves restructuring, has arguably yet to take flight - events of the past few months do not seem like another false dawn. We have already seen a few significant secondary buyouts and exits. Here's hoping that KKR's $1.67 billion purchase of Panasonic Healthcare is the first of many bumper control deals in the Land of the Rising Sun.

• Opportunities in transitional markets: A number of Asia's hottest markets such as Australia, Indonesia and India have cooled in recent years. In the case of Indonesia and India, a revival does not appear imminent. This is not, however, necessarily bad news for private equity. India, in particular, could be a contrarian's dream. With its devalued currency lowering entry prices and the departure of many local GPs from the market easing competition, the current vintage could be a favorable one for those with dry powder. Indonesia needs to see more GPs rather than a consolidation of existing participants. That will come with time. Meanwhile, recent volatility may draw some heat from valuations.

• Governments courting private equity: Over the years, private equity has increased its influence on Asian business and the industry's largely successful track record has not gone unnoticed by governments. Malaysia, Korea, Taiwan are but a few of the markets that have seen some form of stimulus. While not necessarily related, these three jurisdictions are seeing an increase in the number of indigenous local GPs with international LPs.

It is my hope that these are five of many bright spots that emerge over the next 12 months. It is true that many GPs need to spend some time tending the troubled parts of their portfolios, but they also see opportunities on the horizon that are not to be missed.

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• Topics
• Fundraising
• Investments
• North Asia
• Greater China
• Southeast Asia
• South Asia
• Fundraising
• buyout
• China
• Asia
• Japan
• India
• Southeast Asia