Private capital assets focused on the Asia-Pacific region are set to grow to a total $6.1 trillion by 2025, with the majority of allocations to private equity funds.
Alternative assets data provider Preqin said in its inaugural Alternative Assets in Asia-Pacific report that, as of September, APAC-focused alternatives assets under management was $1.71 trillion — almost three times higher than figures in 2015. (Registration is required to get the report.)
Dry powder targeting APAC private capital opportunities, excluding hedge funds, hit a record $446 billion in April, up from $416 billion in December. Private equity and venture capital managers held 77% of dry powder, while real estate managers held 10% and private debt, infrastructure and natural resources funds held the remainder.
Venture capital is a key driver behind the growth of the APAC alternatives industry, with $574 billion of AUM in September.
Hedge funds in the Asia-Pacific region, however, are facing difficulties as shown by new fund launches in the region. In 2020, 117 funds were launched, down 20% year-over-year, due to the COVID-19 pandemic, the report said.
Within the APAC region, different strategies are popular in markets. Australia-focused private equity and venture capital firms held $14 billion in dry powder as of June 30, while there was a 20% increase in the total capital raised by Australia-focused private capital funds in 2020.
Venture capital, meanwhile, is the dominant private equity strategy in greater China, accounting for 46% of total AUM as of September. Private equity and venture capital funds based in greater China held a total $1.04 trillion in assets in September.
Japan's private equity AUM focused on buyouts hit $22 billion in September, double the total in 2015, while dry powder for Japan-focused private equity and venture capital funds stood at $24 billion. That represented a 40% increase from figures as of December 2019.
Private equity AUM also hit a record in South Korea in September, at $102 billion. Buyout funds raised a record $17 billion in 2020, the report said.
For the Association of Southeast Asian Nations, private equity and venture capital industry AUM almost doubled over the five years ended September to $33 billion. In 2020, 400 venture capital transactions, with a combined value of $8.2 billion, were completed across ASEAN countries.
"Investor demand to access this fast-growing and diverse (APAC) region remains robust, while structural challenges to deploy capital are easing," Mark O'Hare, founder and CEO at Preqin, said in a news release accompanying the report. "The dawn of the Asian Age — or rather the re-emergence of the region's economic dominance on the world stage — has been widely anticipated."