Asia-Pacific private capital funding is on course to make 2023 the lowest fundraising year in a decade, according to a recent report.
The total private capital raised in the region by the end of Q3 2023 year-to-date was US$67 billion, which represents only 39% of 2022’s total of US$177 billion, finds analysts at alternative asset investment data company Preqin in its latest quarterly update.
Fundraising in all private capital asset classes (all alternatives asset classes apart from hedge funds) also retreated to just under US$20 billion in Q3 2023, in which the largest declines were in private equity and venture capital fundraising.
China’s economy is key to business in Asia-Pacific, the report points out, but China-focused funds are now raising substantially less than before, a trend the data firm sees continuing in the forecast period.
However, recent reports citing potential fiscal stimulus in China, Preqin adds, could be a turning point and, if well executed, could imply some upside to otherwise conservative forecasts.
For Japanese and South Korean private equity funds, the total intended amount fund managers hope to raise more than doubled in Q3 2023 compared with Q2 2023, but these funds are typically small.
Perhaps unsurprisingly, one bright spot was in the renewable energy sector in which the deal count overshadowed other sectors, with the total transaction value reaching US$16.7 billion, a 75.8% increase from US$9.S billion in the previous quarter.
Another highlight in Asia-Pacific was the hotel sector, in which deal volume in Q3 2023 was the highest since Q1 2022, totalling US$1.2 billion. The Chinese border opening and a recovery in airline services supply have helped support tourism in the region.
“Despite the challenging deals and fundraising landscape in the Asia-Pacific region through persistent macroeconomic headwinds, we are seeing trends emerge across various asset classes, strategies and countries,” says Angela Lai, vice-president and head of Asia-Pacific and valuations, research insights, at the data firm. “Plus, dry powder levels remain within a healthy range, albeit high, in Asia-Pacific and shouldn’t disrupt near-future deal-making.”