Fundraising for ASEAN-focused buyout and growth funds has weakened since the peak of 2015, with $0.8 billion being collected in the first six months of this year, as investors shifted their focus on the region’s venture capital (VC) activity.
According to data service firm Preqin, the capital raised in the January-June period this year by three funds matched the total amount raised in all of 2018 across six funds. However, when compared to 2015’s high of $6.1 billion, the amount raked in by growth private equity (PE) firms has been significantly lower.
As of June 2019, as many as 19 ASEAN-focused buyout and growth funds were on the road looking to raise a total amount of $3.6 billion in investor commitments, the report stated.
Dealmaking in this segment during this year has also witnessed a slowdown. In terms of value, PE-backed buyout deals raked in $0.4 billion across 20 transactions in the first half of this year, that is considerably low when compared to last year’s aggregate of $3.6 billion.
“Political uncertainty in some corners may be putting a brake on larger scale buyout investments,” said Ee Fai Kam, head of Asia research and operations at Preqin, while highlighting the cause of slowdown. “It remains to be seen whether domestic investors will turn to the asset class in greater numbers.”
Meanwhile, paucity of exits in the region might also be a culprit. An earlier report by Bain & Company said that Southeast Asia was among several regions in Asia Pacific that witnessed a sharp decline in exit value in 2018 compared to the average of the 2013-17 period.
Some PE funds have recently missed their fundraising targets. For instance, Singapore-based SC Capital closed the RECAP V vehicle at $750 million, even as it had planned to raise as much as $1 billion.
In total, including venture capital activity, Southeast Asia made up for less than 1 per cent of the $3.6 trillion global AUM at the end of 2018. On a positive note, however, the industry is gaining momentum with both PE and VC AUM increasing 8.6 per cent between 2017 and 2018 to $28 billion, according to Preqin data.
“Southeast Asia presents a wealth of opportunities to private equity and venture capital investors, and clearly many of them are starting to take an increased interest in the region. With several large cities on the global stage, and governments that are encouraging entrepreneurship and technological innovation, these countries make fertile ground for venture capital investment in particular,” said Kam.
VC sets new growth
Standing in stark contrast to PE fundraising, a lot of VC firms have raised capital, some even surpassing their initial target. Sample this: East Ventures recently made headlines when it raised its sixth fund at $75 million, doubling the initial target. Jungle Ventures, on the other hand, is understood to be on track to make a final close of $220 million in the coming months. It recently announced the first close at $175 million for its third vehicle.
Fundraising for tech investments in the ASEAN region has intensified as investors see modes of VC funding as one that could garner them big moolah.
According to the Preqin report, six funds have closed since the beginning of 2019, raising a total of $0.5 billion, representing the same level in the first half of 2018.
Preqin’s full-year data in 2018 showed a record of 17 ASEAN-focused venture capital funds securing a total of $0.9 billion. Early-stage investment is still in its steroid period, with more early-stage funds successfully raising capital, rising from 21 per cent in 2017 to 29 per cent in 2018 out of the total VC funds closed.
At the same time, the aggregate value of Series B and C financings also increased from $0.6 billion to $1 billion. “This suggests that the existing financing gap is narrowing, and we should continue to see more capital going into such rounds in the future,” the report said.