India offers the highest opportunity for venture investors among Asia Pacific markets, given its scale, depth of investable companies, liquidity and long-term growth outlook, according to a new report released by DealStreetAsia and Vistra Fund Solutions on Wednesday (June 24).
The report—Turning Friction into Capital Flow: APAC PE/VC Edition 2026, which is based on a survey of 105 founders, managing partners, investment directors and other private capital executives—examines how private equity and venture capital fund managers assess investment opportunity, market complexity and fundraising conditions across Asia-Pacific.
By creating two indices—the Opportunity Index and the Friction Index—the report quantifies the opportunities and challenges, respectively, across APAC’s private capital markets.
India topped the Opportunity Index with a score of 0.78.
Japan and mainland China followed at 0.72, ahead of Singapore at 0.71 and South Korea at 0.70. These markets also scored above the APAC benchmark of 0.64, pointing to continued interest in APAC’s larger, more established or strategically important markets.
Japan and South Korea are benefiting from corporate transformation, governance reform and operational value creation. Mainland China remains too significant to overlook, given its depth of innovation. Singapore continues to stand out as a regional capital, fund management and operating hub.
When opportunity was measured against execution risk, Singapore emerged as the easiest market to navigate, recording the lowest friction score (0.32) among the 15 markets surveyed. Hong Kong followed at 0.33, ahead of New Zealand at 0.35 and Australia at 0.36. Respondents cited regulatory clarity, governance standards and institutional infrastructure as key advantages.
At the other end of the spectrum, Cambodia recorded the highest friction score at 0.66, followed by Indonesia at 0.60, Vietnam at 0.59, and the Philippines at 0.57. Governance concerns, regulatory uncertainty, weaker exit pathways and macroeconomic risks were cited among the main challenges in these markets.
Governance remains one of the region’s sharpest fault lines, according to the report. Indonesia, Vietnam, and mainland China were identified as the most governance-sensitive markets, where reporting standards, internal controls and enforcement reliability remain significant concerns for investors.
Bringing the Opportunity and Friction scores together, the report has created an APAC PE/VC Opportunity-Friction Quadrant that places markets into one of four quadrants:
- Efficient opportunity markets: Singapore, Australia, Japan, South Korea and India. These markets combine above-benchmark opportunity with below-benchmark friction.
- High-conviction markets: Mainland China, Malaysia and Vietnam, where above-benchmark opportunities co-exist with higher execution challenges.
- Calibrated deployment markets: Hong Kong, New Zealand and Taiwan—markets that are comparatively easier to navigate, but also offer a narrower or more selective opportunity set.
- Precision-entry markets: Thailand, the Philippines, Indonesia and Cambodia, where more careful sector selection, stronger local execution and clearer exit planning are required.
The biggest challenge: fundraising
Fundraising has emerged as the biggest challenge facing private equity and venture capital firms in the Asia Pacific, surpassing concerns over exits and capital deployment, according to the report.
The survey found that 57.5% of respondents identified capital formation as the industry’s primary source of friction, compared with 26.4% who cited exits and 14.9% who pointed to deploying capital.
The findings suggest that APAC’s private capital industry is no longer constrained by a lack of investment opportunities but by the increasing difficulty of raising, retaining and recycling capital through successive fund cycles.
Andi Haswidi, head of research at DealStreetAsia, who authored the report, said the survey shows fundraising and exits have become increasingly intertwined. “The problem in Asia today is not simply whether there are enough companies to invest in. It is whether managers can raise, retain and recycle capital through successive fund cycles.”
Pressure is becoming increasingly evident in limited partner, or LP, reinvestment behaviour. Forty percent of respondents said fewer than 40% of investors from their previous fund recommitted capital to their latest vehicle, while nearly one-quarter reported re-up rates of 20% or less. Only 19.3% of respondents completed fundraising for their most recent fund within 12 months.
David Anderson, executive vice president for Asia-Pacific at Vistra Fund Solutions, said during the report’s launch that weaker LP recommitment rates were among the more notable findings of the survey. “Over 40% of managers reported fewer than 40% of existing LPs reinvesting in the next fund,” Anderson said.
Despite fundraising pressures, investors remain broadly positive on opportunities across the region.
Anderson said India stood out as the region’s clearest conviction market, with investors willing to absorb higher levels of regulatory, governance and currency-related friction because of its growth potential. “The APAC private capital story is no longer just about where growth is. It is about where managers can actually convert growth into returns,” Anderson said. “Allocating to APAC as a single thesis is over. This is now a market-by-market, strategy-by-strategy discipline.”
Private equity vs venture capital investors
The survey found notable differences between private equity and venture capital investors in Southeast Asia. While PE managers expressed stronger conviction in Vietnam, Malaysia, the Philippines, Indonesia and Thailand, citing opportunities for consolidation, formalisation and operational improvement, venture capital investors were more cautious because of concerns over exits, follow-on funding and ecosystem maturity.
Vietnam ranked among the top markets for PE respondents behind India, reflecting continued investor interest in the country’s operational value-creation potential. Mainland China ranked second among VC respondents, underscoring continued confidence in its technology and innovation ecosystem despite geopolitical and regulatory challenges.
James Tan, managing partner at Quest Ventures, said venture investors are increasingly focused on liquidity rather than paper valuations. “The IPO window is incredibly tight, as public markets demand profitability over pure growth,” Tan said. “We are operating in what I call an asset-rich but liquidity-poor market, where converting paper valuations into cash distributions is a very big challenge.”
Tan said many venture investors are increasingly relying on M&As, secondary sales and offshore listings to generate returns rather than waiting for local IPO markets to recover.
Johan Rozali Wathooth, founder and CEO of Malaysia-based Bintang Capital Partners, said governance has become a central component of value creation rather than simply a compliance exercise. “Governance friction isn’t just about compliance. It’s about potentially not achieving your desired valuation and exit, and it will ultimately shape LP confidence in your track record if you can’t get it right,” Wathooth said.
He added that governance reviews increasingly begin before investment terms are agreed, with issues such as board composition, reporting standards and internal controls becoming critical parts of the investment process.
Rather than retreating from higher-friction markets, most fund managers said they were adapting by strengthening local teams, increasing governance oversight and relying more heavily on specialised operating and compliance support.
Nearly 39% of respondents said adjusting operating models was their primary response to market complexity.
The report concluded that Asia-Pacific remains highly investable, but success increasingly depends on a manager’s ability to navigate governance, regulation, liquidity and operational complexity. “The markets of Southeast Asia cannot be ignored,” Wathooth said. “The opportunity is still there, but increasingly it comes down to operational capability, governance, and the ability to convert growth into realised returns.”
