Private capital in the Asia-Pacific region is poised to rebound after a 2023 slump, with Preqin forecasting a compound annual growth rate (CAGR) of 9.5 per cent between 2023 and 2029 to reach US$2.6 trillion in assets under management (AUM).
Venture capital (VC) is set to experience the strongest growth in the Asia-Pacific region, with a projected CAGR of 10.7 per cent during the forecast period, though private equity will remain the largest asset class.
VC in the region is expected to deliver the strongest returns at 16.3 per cent, surpassing even North America’s 15.6 per cent.
Preqin noted that the greatest potential lies in early-stage VC investments.
“Early-stage investments are typically smaller investments at lower valuations which limits absolute downside risk, and by gaining exposure to a larger number of small deals, this allows more portfolio diversification,” it said.
“APAC’s emerging markets such as India and Southeast Asia offer diverse opportunities across different sectors with supportive demographics for economic growth, hence they have been gaining more traction with investors in recent years.”
Meanwhile, private equity in the APAC is projected to slightly lag other regions, returning 12.9 per cent between end 2023 and 2029.
This, the report highlighted, reflects concerns around the China market.
“With approximately half of AUM sitting within China-focused funds, our lower performance forecasts incorporate our assumption that realisation levels will be lower and exit times longer in the next few years mainly in the China market,” it said.
“This will be partially offset by improvement from other markets exposures such as India and Japan.”
Moreover, Preqin’s data forecasts a rebound for APAC real estate, with a return of 7.1 per cent between 2023 and 2029, compared to 3.5 per cent in the 2020 to 2024 period.
Preqin noted that amid uncertainties in China’s property market, investors are increasingly shifting their focus towards core, core plus, and value-added strategies in markets like Japan, Australia, and South Korea, seeking greater stability and yield.
“Furthermore, global diversified funds not bound to an APAC-only mandate are also increasingly chiming in, which helps support deal flow and liquidity in the market,” the report said.
The report also identified infrastructure in the Asia-Pacific region as a relative bright spot, projecting returns of 9.4 per cent between 2023 and 2029. Notably, it emphasised the region’s pressing infrastructure needs, ranging from basic projects like road construction to advanced upgrades in renewable energy and digital assets.
On the other hand, Preqin expects a moderation in APAC private debt returns to 10.4 per cent, down from recent highs but still above the 9.2 per cent achieved between 2017 and 2023.
