Private capital is playing an increasing role in asset allocations across Asia-Pacific, as demand to access this fast-growing and diverse region remains robust, the report said.
The alternative investment market in Asia will reach $6 trillion in assets by 2025, according to the research firm, Preqin, while capital available to be deployed (excluding hedge funds) sits at $446 billion, a record.
Areas such as private equity, private debt, real estate and infrastructure have expanded rapidly because investors are willing to shoulder the superior yields in return for the relatively low liquidity at a time of ultra-low interest rates.
“Asia-Pacific has been an engine driving global growth for more than a decade now and is in the middle of an historic transformation. Investor demand to access this fast-growing and diverse region remains robust, while structural challenges to deploy capital are easing. 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,” Mark O’Hare, founder and CEO at Preqin, said.
Preqin said the amount of un-deployed capital – also known as “dry powder” – has risen from $416 billion in December 2020. Some 77 per cent of this capital is held by private equity and venture capital fund managers in Asia, followed by real estate (10 per cent).
Growth in private capital between now and 2025 will be “explosive” in Asia, Preqin said, rising from $1.71 trillion in September 2020.
One big driver of such growth is venture capital, with AuM of $574 billion held by fund managers in the region, as of September 2020. Almost 36 per cent of total Asia Pacific-based private capital assets under management are held by venture capital funds - the most prominent strategy in the region.
Hedge funds have faced more difficulties, however. New fund launches in the region fell by more than 20 per cent in 2020 from 117 on the back of the COVID-19 pandemic.