Private fundraising in Asia Pacific may hit 10-year low, says Preqin

By Sharon Klyne
 

Private capital fundraising in Asia Pacific may hit a decade low this year, as investors shift away from China-focused funds, according to London-based research firm Preqin Ltd.
 

Funds raised in the region in the first half of 2023 accounted for 22% of last year’s total, Preqin analysts wrote in a quarterly report. Aggregate capital targeted by China-focused funds fell to $115.9 billion at the end of the second quarter, from $141.9 billion in the previous three months.

The dismal regional outlook for private capital, a relatively opaque part of the financing world, is another reminder of the wide-ranging repercussions of a slowing Chinese economy that has affected everything from commodities to stock listings. It also shows the broader impact of aggressive monetary tightening by major central banks, which has pushed up borrowing costs and heightened concerns about debt defaults and a global recession.

“Nonetheless, we continue to view China’s economy as holding the key to a full recovery in the region, with its broad range of investment opportunities and deep capital markets, and significant influence as the top trading partner for many APAC countries,” the report said. 

Japan was the region’s outperformer, reflecting the strength of its stock market, Preqin said. Private equity deal-making topped the region for two consecutive quarters. The yen’s depreciation also helped boost the nation’s appeal to international investors, particularly those in real estate.

Private equity fundraising in Asia Pacific remained weak at $5.6 billion in the second quarter, although the figure was more than double the $2.7 billion raised in the previous three months.

The weak environment for private equity to cash in on their investments persisted in the region, despite an upswing in exit value to $8 billion from $5.6 billion in the first quarter. “This is in line with the overall weaker deal environment and indicates a still-cautious general market sentiment,” Preqin said.

Similarly, venture capital fundraising in Asia Pacific has declined more than in other regions, contracting to $4.5 billion in the second quarter, the lowest in at least five years. Most of this was due to China-focused funds, which raised $2.7 billion, marking a 54% drop from the prior quarter. 

However, the outlook for venture capital funds is less dire, with interim closes by China-, India- and Singapore-focused funds reaching around $6 billion in total during the first half of this year, Preqin added.

Elsewhere, demand for private credit rebounded globally in the second quarter, with 34 new funds raising $71.2 billion, more than double the previous three months, according to Preqin’s data.