Fundraising by Southeast Asia-focused private equity (PE) funds in the first half of the year has already matched the tally for the whole of 2020, finds the latest report by DealStreetAsia – DATA VANTAGE.
According to Private Equity in SE Asia: H1 2021 Review, four Southeast Asia-focused PE funds secured a final close through the first half, raising $1 billion in total. In comparison, PE fund managers in the region had raised $1 billion in 2020 and $1.3 billion in 2019.
The funds closed in the first half include Asia Partners’s debut fund, which raised $384 million for its final close in March, and Mekong Capital’s $246 million fifth fund.
The second half of 2021 has already seen Navis Capital Partners close its eighth fund at $900 million and a continuation fund at $450 million. The strong momentum means 2021 is set to be a record PE fundraising year for this region.
“By and large, Southeast Asia has confirmed to be a resilient market, still ripe with opportunity and with strong long-term fundamentals – it’s not surprising that after a year of very slow fundraising, LPs are coming back,” said Alessandro Cannarsi, a partner at Bain & Company Southeast Asia.
Beyond SE Asia-focused funds, the report covers Asia/Asia Pacific funds whose investment mandate includes at least one market in Southeast Asia. A total of seven funds within this category reached a final close in the first six months of this year with combined proceeds of $38.1 billion — more than double the value secured last year.
PE major KKR & Co accounted for more than $20 billion of that total, with $15 billion alone coming from the final close of its fourth Asia buyout fund in April.
Multiple positive signals
Bain’s Cannarsi attributed the “impressive” pick-up in fundraising to multiple positive signals.
“It became clear towards the end of last year that multiple sectors were recovering or benefitting from the pandemic, particularly in the tech space where digitisation has been accelerated by the pandemic,” he said.
Fund managers have also benefitted from rising private market capital allocations by investors looking for higher yields in a low interest rate environment, said Neil Parekh, partner and head of Asia, Australia and New Zealand at Tikehau Capital.
“The growth in both absolute and relative allocations to PE funds also points to a view amongst LPs that growth is likely to be strong in the near future in the region,” he added.
However, there remains plenty of room for caution. The economic recovery of Southeast Asia from the pandemic and its after-effects will be keenly watched by fund managers and LPs alike.
The patchy track record of fund managers in the region is another concern.
“In general, global LPs have been disappointed with the returns and realisations in Southeast Asia. That’s why you’ve had very few new names emerge in the region,” said Creador founder and CEO Brahmal Vasudevan.
Funds in the market
As of the report’s publication, a total of 28 SEA-focused PE funds are currently in the market to raise $6.8 billion, up from $5.8 billion identified as of December last year. Of the total target, $2.9 billion, or 42% of the target corpus, has been secured.
Indies Pelago Investments II, the second vehicle of Singapore-headquartered Indies Capital Partners, was the only SE Asia-focused fund launched this year. In comparison, last year saw seven new funds being launched.
Separately, 33 Asia/APAC funds are currently in the market to raise $44.4 billion, of which only $7.9 billion has been secured so far. Six new funds were unveiled this year with a combined target of $11.2 billion. These include Baring PE Asia’s eighth fund, which is seeking to raise $8.5 billion in total.
Our latest report, Private Equity in SE Asia: H1 2021 Review, covers PE fundraising trends since 2018, fund manager leaderboard per strategy, and the performance of Asia/APAC funds with a mandate to invest in Southeast Asia. Access now.