Private equity fundraising for Asia investments has slowed from last year’s record pace, as investors contend with volatility and other challenges in global markets.
In the first half of 2022, nine Asia-focused PE funds raised $10.6 billion, a roughly 64% decline from the $29.6 billion gathered by 39 funds during the same period last year, according to PitchBook data. Through the end of July, only $18.5 billion was raised, setting a pace that, if sustained, is unlikely to surpass last year’s total fundraising value of nearly $41 billion.
The largest Asian buyout fund raised so far this year was Primavera Capital‘s $4 billion buyout vehicle closed in April, smaller than a $15 billion fund raised by KKR last year, 2021’s largest.
The slowdown appears to be in line with a broader trend affecting the PE industry in other regions, in which buyout firms are facing tougher fundraising terrain after drawing a record amount of capital from asset allocators last year.
Shorter intervals between fundraises alongside a challenging exit environment have started to put more pressure on the fundraising prowess of large asset managers. Both Apollo Global Management and The Carlyle Group are raising their latest buyout funds at a slower pace than they initially planned, Bloomberg reported.
“While mega-funds have been able to successfully fundraise so far, especially compared to less-established or smaller firms as LPs are prioritizing existing relationships during a crowded fundraising market, we are seeing fundraising difficulties starting to reach the large firms as well,” said PitchBook’s PE analyst Jinny Choi.
“After an incredible deployment year in 2021, GPs have been returning to market quickly—and often requiring step-ups in fund size, putting pressure on LP capacity to fund these commitments.” she said. “Meanwhile, with exits slowing down in the current market environment, there is also less sufficient capital recycling into new fundraises.”
Against this shifting background, PE firm Bain Capital is marketing its latest Asia-focused buyout fund, according to multiple reports. The fund has a target of $5 billion, Bloomberg reported, which is smaller than funds raised by its peers last year to pursue similar strategies.
The 2018-vintage predecessor, Bain Capital Asia Fund IV, was closed at $4.65 billion, 43% larger than the previous fund raised in 2015. Still, Bain Capital hasn’t set a hard cap for the new fund yet, indicating the firm could eventually rake in more capital from investors at its final close in the first quarter next year.
Bain Capital declined to comment on the fundraising.
The Boston-based asset manager has about $25 billion in dry powder—money committed but not yet deployed—to invest worldwide, including a $2 billion special situations fund targeting structured credit and equity investments in the Asia-Pacific region. The fund, closed in early June, is designed to provide more downside protection for investors, according to a person familiar with the firm’s strategy.
The slowdown has not yet had a significant effect on the pace of dealmaking in Asian buyout markets, according to Kit Jong Tan, a managing director at Flexstone Partners, a PE fund-of-funds manager.
“The overall Asia private equity market was relatively resilient in 1H 2022 despite the adverse macroeconomic conditions,” he said in an email to PitchBook. “No slowdown in capital deployment pace and distribution.”
PE investors targeting the region remain flush with capital. Asia-Pacific-focused funds held a record of $650 billion in dry powder at the end of last year, according to Bain & Company’s most recent Asia-Pacific Private Equity Report.
Featured image by MirageC/Getty Images
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