Global Funds of Funds Currently in Market that will Seek Exposure to Asia

Date: Monday, November 25, 2013
Author: Preqin

Funds of funds have traditionally been a mainstay of the private equity industry as it eases investors’ foray into the asset class. Funds of funds are essentially seen as a less risky strategy for investors who are not as experienced as their counterparts or who seek a smaller commitment size. Through such vehicles, investors are able to gain access to top-tier fund managers and exposure to more niche markets that they are relatively unfamiliar with. Preqin’s Funds in Market currently tracks 49 global funds of funds currently in market that will seek exposure to Asia. Collectively, these fund of funds vehicles are targeting an aggregate $11.6bn.

Looking at the geographical focus of the 49 global funds of funds currently in market that will seek exposure to Asia, China is targeted by 31% of these vehicles. Twenty percent of funds in this pool will seek investment opportunities in India, followed by Japan (10%) and South Korea (8%). This highlights that the two prominent emerging markets, China and India, are the most favored destinations for private equity capital deployed in Asia by fund of funds managers. Such interest could be attributed to the rising number of international investors seeking to tap into the growing private equity industry present in Asian emerging markets, whereby they invest through the less risky approach of fund of funds vehicles. Further analysis reveals that 22% of the global funds of funds currently in market that will seek exposure to Asia target solely the Asia region, while 78% of the corpus scours for fund opportunities both in and outside of Asia. Of the 38 funds of funds in this pool that seek global exposure, a significant 76% target Europe as an investment destination for fund commitments, followed by North America (55%), South America (29%) and Australasia (18%).

A significant 43% of fund managers raising global funds of funds currently in market that will seek exposure to Asia are located in the US. These managers, located in the federal republic, are targeting an aggregate of $5.9bn, which represents almost half of the total amount targeted by these funds. Following this, China is home to 12% of such managers, while Switzerland and Germany account for 10% and 6% respectively. The remaining 29% is split fairly evenly between GPs located in both Asia and non-Asia regions such as Hong Kong, Japan, Singapore, France and the UK. As iterated earlier, these findings could be an indicator that foreign-based managers seek exposure to Asia through a fund of funds approach, in response to investors’ appetite.

Forty-one percent of global funds of funds currently in market that will seek exposure to Asia have yet to hold their initial interim close. A further 39% of the funds in this pool are at their first-close, and 12% at their second close. The remaining vehicles have held third- and fourth-closes respectively. There are an equal proportion of these funds with vintage years 2013 and 2012, accounting for 37% each. Twenty-two percent are vintage 2011, and the remaining 4% made their initial investments in 2010 or before. An example of a large primarily Asia-focused fund of funds currently being raised is China-based Oriza Holding’s GC Oriza Fund of Funds. The fund is Oriza Holding’s maiden venture-focused vehicle that specifically targets the Chinese market.