Assets Under Management AUM

Robust growth in Asia is a major draw for fund managers

THE alternative investment market in Asia is expected to experience explosive growth in the years to come.

With the region’s growing economic dominance on the global stage, investor demand to access this diverse and rapidly growing market is expected to remain robust.

According to Preqin, private capital assets under management (AUM) targeting Asia could reach US $ 6 trillion (RM 24.9 trillion) by 2025, representing a compound annual growth rate of 28.3 % from 2020.

“The continent is home to a very diverse range of economies at various stages of development, market sophistication and innovation – all of them need public and private capital in ever-increasing amounts,” said Mark O’Hare, founder. and CEO of Preqin, which specializes in data, tools and information on alternative assets.

“This provides fertile ground for fund managers across the spectrum of alternative investments and bodes well for the continued expansion of the industry,” he adds.

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It recognizes that while the ability of international institutional investors to deploy capital in the region has historically been constrained by several structural challenges, many structural challenges to deploy capital are likely to abate in the future, subject to the resolution of issues. current geopolitical tensions.

In his first-ever comprehensive ‘Alternative Assets in Asia-Pacific’, Preqin notes that Asia-Pacific-focused private assets under management have nearly six-folded over the past decade, reaching US $ 1.71 trillion (7, RM 09 trillion) in September 2020, with $ 133 billion (RM 551.22 billion) raised in the first nine months of 2020 alone.

In addition to the 156 billion USD (646.54 billion RM) held by Asia-Pacific hedge funds in the fourth quarter of 2020, the alternative investment sector in the region appears well on its way to reaching the 2,000 billion mark. dollars (RM 8.29 trillion) in aggregate assets.

“These growth trends reflect much more than the continued search by international investors for returns and diversification opportunities for their global portfolios. Indeed, Asia-Pacific has been an engine of global growth for over a decade now, ”says O’Hare.

The report also states that the dry powder of Asia-Pacific-based private equity (excluding hedge funds) held by fund managers stands at a record $ 446 billion (RM 1.85 trillion) in April 2021, against $ 416 billion (RM 1.72 trillion). ) in December 2020. The majority (77%) of this ready-to-deploy capital is held by private equity and venture capital (PEVC) fund managers in the region, followed by real estate (10%) .

Promising opportunities

O’Hare points out that while Asia-Pacific growth has so far been largely dominated by China, the region’s emerging markets – from Southeast Asia to South Asia – are becoming the catalyst for many growth trends; and investors are taking note.

Preqin notes that expectations about Southeast Asia’s growing role as a key source of economic growth in Asia have increased dramatically in recent years. The region has one of the fastest growing populations in the world, a rapidly expanding middle class and one of the highest digital penetration rates in the world, according to the report.

From a macroeconomic perspective, there is a growing need for capital across Southeast Asia to fuel innovation and development, as global trade and supply chains diversify away from China. .

For example, over the past two decades, foreign direct investment (FDI) in ASEAN has grown steadily from around US $ 22 billion (RM 91.18 billion) in 2000 to a record high of 161 billion dollars (667.26 billion RM) in 2019.

“If there had ever been a perfect time for the stars to align and private capital to tap into a region’s potential, the moment for Southeast Asia may have already arrived,” he says. worth Preqin.

According to Preqin, the AUM of the ASEAN-focused PEVC industry had nearly doubled in the past five years to a record US $ 33 billion (RM 136.77 billion) in September 2020, of which $ 13 billion. (RM 53.88 billion) in dry powder, or capital available for deployment.

He believes that while the Covid-19 pandemic has dampened fundraising activity in 2020, it has also accelerated ongoing digitization trends at an all-time high, which is a likely boon for fund managers seeking to access emerging opportunities in the region.

“We expect fundraising to recover as the end of the pandemic becomes clearer around the world. In fact, fundraising activity in April 2021 ($ 1.3 billion or RM 5.39 billion) is already on the verge of overtaking last year’s low turnout ($ 1.4 billion or RM 5.8 billion), underscoring the early start of a more active capital raising environment this year. , “says Preqin.

In 2020, Asean saw the completion of 400 venture capital transactions with a combined value of US $ 8.2 billion (RM 33.98 billion).

Despite the uncertain trading environment brought on by the pandemic last year, the sum was the second highest figure in the past 10 years, and just below the record high of $ 8.8 billion ($ 36.47 billion de RM) negotiated in 2018, emphasizes Preqin.

He notes that the composition of private equity transactions in Asean has been dominated by consumer discretionary and information and communications technology transaction activity, and this will likely continue to be the trend. ‘to come up.

This is particularly the case when one takes into account the large proportion of all assets under management in the private equity sector targeting ASEAN and held by growth funds, which generally target higher growth companies. fast.

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