Preqin analysts say the long-term outlook for Asia-Pacific remains bright despite global economic headwinds.
LONDON, June 24, 2024 (GLOBE NEWSWIRE) — Preqin, a global leader in providing essential data and insights to the alternative investment community, today announced Alternatives in APAC in 2024 The report features regional analysis and country-specific insights for China, India, Japan, South Korea and Australia. The report notes that while the near-term outlook for the Asia-Pacific (APAC) region may look cautious due to weak funding and geopolitical challenges, Preqin’s analysts maintain a positive outlook for the region in the longer term.
Long-term investors will likely continue to be attracted to the underlying growth potential of emerging markets such as India and Southeast Asia, where early-stage venture capital (VC) opportunities are plentiful, and developed markets such as Japan and South Korea, which have attractive real estate markets.*
The report also found that investors are increasingly favoring experienced over novice fund managers in Asia Pacific. According to Preqin data, in 2023, the difference in average capital raised by both groups will be the largest since 2015, reaching a staggering $78 million. Indeed, experienced managers will raise around $180 million on average, the highest amount since 2015, while novice managers raised just over $100 million.
Japan and Indian markets are bright spots for investors
With most country funds struggling to raise capital, total capital raised in Japan in 2023 was $11.8 billion, 13.4% higher than in 2022. This was mainly due to the closing of several larger-than-usual private equity funds. Japan’s accommodative interest rates and a weaker yen supported deal market growth in 2023, with private capital deal volume reaching a five-year high of $34.8 billion, surpassing its previous peak in 2021 and roughly matching China as one of the most active private equity markets in Asia-Pacific. Meanwhile, for India, Preqin analysts have a positive long-term outlook for the market. Private capital has grown significantly, doubling in the past five years to surpass other Asian countries, and Indian private debt boasts the largest single-country AUM in Asia-Pacific.
Angela Lai, VP of Research Insights, Head of APAC and Valuations at Preqin said: “Asia Pacific was not spared from the global macroeconomic headwinds that plagued global markets in 2023. However, with fundraising in the region hitting a decade-low and most country funds struggling to raise capital, demand for regional funds increased amid investors’ increased desire for diversification and reduced risk appetite.”
Other key findings include:
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Asia-Pacific ESG funds raised significantly less capital than the global average: Global environmental, social and governance (ESG) fundraising is expected to fall 38% from 2022 to 2023, with Asia-Pacific hit hardest, down 77%, with total capital raised falling from $13.5 billion to $3.1 billion. The proportion of ESG funds closed in Asia-Pacific continues to decline: Asia-Pacific accounted for 14% of funds closed in 2021, but that fell to 6% in 2023, with the number of global ESG funds closed falling 10% during that time.
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Asia Pacific office sector driven by robust demand: The North Asian office market is becoming a focus of deal activity. In 2023, office transactions accounted for 39% of total transaction value and 53% of total transaction volume in Asia Pacific. Demand increased in South Korea in particular as vacancy rates for Grade A office space in Seoul fell below 3%. Japan also saw an increase in office transactions in the first quarter of 2024, overtaking South Korea to become the most active office asset market in Asia Pacific.
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Lowest fundraising years in the last 10 years: Fundraising in Asia-Pacific fell sharply in both the number of funds closed and total capital raised, hitting a decade low, due to geopolitical tensions and rising interest rates. Funds raised approximately $27 billion on average in 2023, well below the five-year average of $69.5 billion. Meanwhile, fundraising focused on Greater China declined significantly in 2023.
Notes to editors:
The currency is USD
*Key findings from Preqin’s “The Future of Alternative Investments 2028” report
For more information or to speak to one of the report’s authors, please contact Mimi Celeste Taylor at mimiceleste.taylor@preqin.com.
About Preqin
Preqin is the Home for Alternative Investing™, providing financial professionals with the critical data and insights they need to make confident decisions when investing in alternatives or allocating to alternative assets. We support professionals throughout the investment lifecycle with critical information and cutting-edge analytical solutions. For over 20 years, we have pioneered rigorous, private data collection methodologies to enable over 200,000 professionals worldwide to efficiently raise capital, source deals and investments, understand performance, and stay informed. For more information, please visit www.preqin.com.
